Good morning,

As the UK employment rate beat expectation to post its highest recorded number since the 1970s, sterling duly jumped to keep pace with the surprising news and pushed back the losses for the entire month against the euro and the dollar.

Traders reacted well to the news, giving the pound the shot in the arm it desperately needed after last week’s data woes and pricing in of a Bank of England interest rate cut. The percentage chance of a rate cut stood at 72% before the data release and shrank down to 66% shortly afterwards; as it stands, that number stands at 60% – in the run-up to the rate decision meeting on the 30th, this number will be the ultimate guide to sterling’s movements.

Currently, the pound is up by 0.33% on the euro and 0.48% versus the dollar, but make no presumptions at this point, as critical UK manufacturing data is due to be released on Friday at 9:30 GMT, which could turn that 60% into 80%.

In short, in terms of the percentage chance of a rate cut; the greater the number, the worse it is for sterling in the midterm, with the tone very much being set for the high-level trade talks with the EU starting on the 1st of February.

Have a great day,

Author: Joshua Haden-Jones, Senior Relationship Manager


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