GBP employment hurts / US Fed will dominate this week
Pretty awful employment news from the UK this morning – relating to December’s labour market. UK unemployment as a nation increased from 4.9% to 5%. The most hard-hitting stats is that in December there were 14 redundancies per 1,000 employed – this shows a true economic contraction, based on real-world activity.
GBP hasn’t initially plummeted, as expectations were low, but GBP/EUR fell near 1.1200 and GBP/USD to 1.3600.
Risks to GBP/USD remain - at the mercy of the broader market risk sentiment and the USD price dynamics.
Hence, the market focus will remain on this week's key US event/data risk. The FOMC is scheduled to announce its monetary policy decision on Wednesday. This will be followed by the release of the Advance US Q4 GDP report. This, along with the US stimulus headlines, will drive the USD in the near-term and provide a fresh directional impetus to the GBP/USD pair.
As a backdrop, global risk sentiment took a hit after German data added to worries about the economic fallout from the coronavirus pandemic. Apart from this, concerns about roadblocks to the US President Joe Biden's $1.9 trillion stimulus plan. Adding to this, escalating US-China tensions in the South China Sea further weighed on investors' sentiment.
Vaccination efficiency in the UK keeps a floor under GBP, and we are seeing vaccination headlines begin to affect markets – here is a summary :
EU officials are frustrated with delivery delays from AstraZeneca, ahead of an expected approval of the inoculations on Friday. The British pharmaceutical refuted a report in the German press suggesting its solution is inefficient with older people.
Moderna announced that its vaccination works against the South African strain and that it is working on a booster shot. Maccabi, one of Israel's Health Management Operators, showed that Pfizer’s vaccinations have good returns. Johnson and Johnson are set to report final results from its Phase 3 trial for a one-shot vaccine during the week.