Forex snapshot

GBP/USD holds onto yesterday’s gains while EUR/USD finally makes a move towards its June lows. 

Dollar bill Pound note
Source: Bloomberg

GBP/USD could hold steady

Yesterday the UK inflation rate unexpectedly jumped up to 1.9%, only a fraction away from the targeted 2% level. Today we have seen confirmation that the UK unemployment rate is at 6.5%, still a little too high but edging towards levels that will need to be hit in order for the Bank of England to feel confident about raising interest rates.

One statistic that is not falling into place is the UK average earnings, which grew at 0.3% below the expected 0.5%. Due to the heavily indebted nature of the UK population towards mortgages, an improvement in earnings will need to be seen in order to make up for the extra repayments that would be a result of increased interest rates.

This probably goes some way to explaining why we have not seen more of a climb from GBP/USD.

EUR/USD close to June low

The European Central Bank president, Mario Draghi, must be breathing a sigh of relief following the fall in the EUR/USD. At the time of writing it is currently sitting at $1.3535, and is within striking distance of the early June low when the targeted long-term refinancing operations were first announced.

The low from 5 June was $1.3505, but the level needed to be breached to see lower lows would be the mid-February $1.3475 level. The driving force behind moves in the EUR/USD continues to be statements and data from the US rather than the eurozone.

That being said, tomorrow morning will see the latest inflation figures for the eurozone announced and expectations are that it will remain unchanged and uncomfortably low, below 1%.

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