The pound made new gains against the euro and US dollar on Friday following the UK’s better-than-expected GDP data and a mixed US jobs report.
As of this morning, the pound is currently up 2.5% against the greenback since Friday morning, its biggest jump against the US dollar since early January. However, compared to this time last year, GBP/USD is trading approximately 7% lower.
Towards the end of last week, US unemployment rate rose to 3.6% in February, however non-farm payrolls rose by 311,000 in the same month. This was considerably higher than the expected 205,000.
After the British economy was revealed to have grown by 0.3% in January, prime minister Rishi Sunak said, “confidence is returning”. This growth comes after a sharp fall in December. Sunak later added that the economy is, “better than people had feared”.
Germany’s annual inflation rate came in at 8.7% on Friday for February, remaining well above the European Central Bank’s 2% target. This reflects a 0.8% increase from the month prior.
Today is quiet on the data front, however markets can expect a variety of economic releases over the course of the week. Tomorrow economists await UK unemployment rate and claimant count change.
Tomorrow afternoon, all eyes will be on US inflation. The January rate slowed to 6.4%, which marked the lowest reading since October 2021. It is forecast to slow further on Tuesday to 6.2%, so economists will be watching the US dollar for movements.
On Wednesday, US retail sales figures are due to be released. Markets expect a loss of -0.2% from 3% in January.
Also on Wednesday, chancellor Jeremy Hunt will present his first budget of 2023. Economists will be looking out for the role of energy prices, the general mood about medium-term prospects and whether the government will address pressures on public services.
While towards the end of this week, Thursday brings an interest rate decision from the European Central Bank. The current hawkish mood is reflected in current forecasts of a 50-bps increase.
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