• GBP recovers from earlier declines on inflation report hearings
  • The Pound had dropped on unexpected rise in unemployment
  • Carney states market pricing for rate hikes inline with data

The Pound has staged something of a comeback this afternoon after being the weakest currency in G10 around lunchtime following an unexpected rise in the unemployment rate. The unemployment rate rose for the first time in 2 years in December from 4.3% to 4.4% and whilst it remains low by historical standards it was enough to cause the Pound to slide. 

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 The GBP has recovered from some of its earlier weakness to trade little changed on the day. Source: xStation

The gains this afternoon can be largely attributed to the inflation report hearings which has seen 4 members of the MPC including Governor Carney testifying before a Treasury Committee. The overall tone of the rate-setters could be described as mildly upbeat and has seen Sterling make steady gains into European close. One of the takeaway comments came from Carney himself when he said that financial markets are now pricing the future path of rates in line with the data. This is significant because markets currently assign a greater than 50% chance that the BoE will hike again in May and Carney’s comments seem to suggest this is a fair estimate. Other selected quotes can be found below:

  • Further stimulus withdrawal needed in coming years
  • Won’t commit to a specific path of interest rates
  • Path at Nov report was 2 hikes, now almost 3
  • Reasons for more hawkish view now is stronger world economy and somewhat stronger economy in the UK too

As we focused on the GBPUSD in the earlier analysis following the employment data, let’s turn our attention to another GBP pair and focus on the EURGBP. 


This market is in a longer term bearish channel which dates back to around September last year. The market has recently respected the upper bound of this channel and should it end today around current levels or lower then further downside may be expected. The 8 and 21 EMAs are converging and could be set to print a negative cross with this signal leading to further declines on 3 occasions in the last 6 months. 

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 The EURGBP has failed to keep hold of its earlier gains and could be set for another move lower. Source: xStation