Pound Recovers Ground as UK Unemployment Hits Record Low

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  • IMF Cuts 2019 Global Growth Forecast – Australian Dollar trends lower as risk appetite diminishes further
  • UK Unemployment Rate Hits Fresh Low – Tightening labour market offers boost to Pound
  • Negative German Business Sentiment Limits Euro Demand – Confidence in Eurozone outlook remains muted
  • New Zealand Dollar Holds Ground Ahead of Consumer Price Index Data – Weaker inflationary pressure could drive NZD exchange rates down

Australian Dollar Stumbles as IMF Cuts Global Growth Forecast

Worries over the outlook of the global economy continued to weigh heavily on AUD exchange rates yesterday. The IMF’s decision to cut its 2019 global growth forecast from 3.7% to 3.5% provoked fresh market jitters, leaving the risk-sensitive Australian Dollar exposed to downside pressure. With the Australian economy exposed to any global slowdown the mood towards the ‘Aussie’ naturally soured. An easing in the latest ANZ Roy Morgan weekly consumer confidence index added to the bearishness of the Australian Dollar.

Another disappointing showing from the Westpac leading index could extend the losses of AUD exchange rates this morning.

Fresh Low in UK Unemployment Boosts Pound

Confidence in the Pound picked up in the wake of November’s raft of UK labour market data. Investors were pleasantly surprised to find that the unemployment rate had fallen to a fresh low of 4.0% in the three months to November. Accompanied by another solid acceleration in wage growth this gave GBP exchange rates a solid boost, even though the data is unlikely to alter the policy outlook of the Bank of England (BoE).

January’s CBI business optimism and industrial trends orders could put pressure on the Pound, however, if sentiment shows fresh signs of deteriorating.

Euro Muted as German Economic Sentiment Remains Negative

A modest improvement in January’s German ZEW economic sentiment index offered limited support to the Euro overnight. Even though the survey bettered forecasts, avoiding a fresh decline, this was not enough to encourage greater confidence in the outlook of the Eurozone’s powerhouse economy. As the index remains firmly within negative territory, along with the overall Eurozone reading, the appeal of the single currency remains limited.

In the absence of any fresh domestic data the Euro may struggle to find any significant degree of support today as markets brace for the European Central Bank (ECB) announcement.

US Dollar Recovers Ground in spite of Home Sales Slump

US existing home sales suffered a sharply slump of -6.4% in December, pointing towards a continued state of weakness within the housing market. However, this marked decline failed to prevent USD exchange rates recovering some of their lost ground as worries over the global economy picked up. Even so, the ongoing government shutdown and air of political unease remained a drag on the US Dollar.

Any rebound in the Richmond Fed manufacturing index could offer a potential rallying point to USD exchange rates overnight.

Sharp Decline in Manufacturing Sales Dents Canadian Dollar

The Canadian Dollar came under significant pressure after November’s manufacturing sales data fell short of forecast. A sharp -1.4% contraction in sales on the month dented confidence in the health of the Canadian economy, suggesting that domestic sentiment is still in decline. This left CAD exchange rates to trend lower across the board last night, losing further ground as oil prices slumped once again.

If November’s retail sales contract as forecast the Canadian Dollar looks set to shed further ground in the near term.

Solid Services PMI Supports New Zealand Dollar

While the New Zealand services PMI eased slightly in December this was not enough to weigh down NZD exchange rates. As the PMI continues to point towards solid sector expansion confidence in the outlook of the domestic economy still improved. Although worries over the global growth outlook picked up further this failed to negatively impact the New Zealand Dollar yesterday.

An underwhelming performance from the fourth quarter consumer price index may dent NZD exchange rates, however, as domestic inflationary pressure remains muted.

Data Releases

January 23rd 08:45 NZD Consumer Price Index (YoY) (4Q) 1.8%
January 23rd 10:30 AUD Westpac Leading Index (MoM) (DEC) 
January 23rd 22:00 GBP CBI Business Optimism Index (JAN) -22
January 24th 00:30 CAD Retail Sales (MoM) (NOV) -0.7%
January 24th 02:00 USD Richmond Fed Manufacturing Index (JAN) -2

Post by TorFX

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