Sterling was strongly supported yesterday, strengthening between 0.5 and 0.75% against the US dollar and yen, slightly less against other major rivals and remaining stable against the euro.
This was despite a dearth of data yesterday.
No shortage of data this morning, however. We have just seen the first of today’s three major data releases, the adjusted experimental unemployment rate in the UK which rose to 4.2% in the three months leading to August 2023. This was up from 4.0% in the previous three-month period.
In reaction to the ‘experimental’ unemployment figures, the pound has strengthened by 0.75% against the US dollar this morning.
Today we will get Purchasing Managers’ Index (PMI) readings from the major Western economies, including the UK at 9.30 a.m. However, we have already seen services PMI in Japan at 51.1, lower than the anticipated 52.9. Also in Japan, the manufacturing PMI missed market expectations of 49, coming in at 48.5 in October.
Germany’s GfK Consumer Confidence data is set to fall to a seven-month low of -28.1 in November, worse than forecasts of -26.6. Consumer sentiment decline is largely due to rising energy and food prices.
Returning to yesterday, however, the biggest story was the plunge in the value of the US dollar, particularly against sterling and the euro. The dollar index fell to its lowest since September, as the markets factored in a more dovish Federal Reserve and wavering bond yields.
Early in the day, US Treasury 10-year yields went over 5% for the first time since 2007, before slipping back. In the UK, meanwhile, 30-year gilts hit a yield of 5.209%. This means that government borrowing hit its most expensive rate for 25 years, as global investors bet on higher UK interest rates.
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