Pound Sterling slipped below $1.35 on Tuesday as another fall in UK payrolls offered little support against a Dollar strengthened by rising US bond yields.
Pound to Dollar (GBP/USD): 1.347349 (-0.20%)
Euro to Dollar (EUR/USD): 1.153745 (-0.10%)
UK payroll employment fell by a provisional 26,000 in August, while unemployment held at 4.9% in the three months to July.
Annual growth in total pay slowed to 3.9% from 4.2%, although regular wage growth was unchanged at 3.5%.
The figures give the Bank of England reasons to hold back from an interest rate increase, but tomorrow’s inflation report will be important before Thursday’s decision.
Overseas, US Treasury yields climbed above 5% as investors prepared for the Federal Reserve’s announcement on Wednesday.
The Brent crude oil price (in USD) traded around $107 after renewed attacks on Saudi energy infrastructure, adding to inflation worries and the pressure on bond markets.
The US Dollar and Chinese Yuan lead the gains against the Pound, followed by the Swiss Franc and Canadian Dollar.
Pound Sterling’s strongest advance is against the South African Rand (ZAR), while the New Zealand Dollar (NZD) continues to lose ground.
US Dollar (GBP/USD) – 1.346687 (-0.25%)
The Dollar is benefiting from expectations of a Fed rate increase, with futures putting the probability of a move on Wednesday at roughly 93%.
With that decision largely priced in, the forecasts and guidance on subsequent meetings may matter more than the increase itself.
A signal that further tightening is likely could extend Dollar gains, while a cautious message could disappoint buyers.
GBP/USD is testing the recent 1.3465 low after losing 1.35, leaving little room for another adverse US rates move.
Our dashboard places GBP/USD at the bottom of its 30-day range, with a 14-day RSI of 32.1.
GBP/NZD is near the opposite extreme, with an RSI of 87.6 and a one-month gain of 1.83%.
Those readings flag weak momentum in GBP/USD and a risk of a pullback in GBP/NZD, but neither establishes that a reversal is imminent.
Euro (GBP/EUR) – 1.168224 (-0.07%)
The Euro edged higher against the Pound after ECB officials warned that rising energy costs could require further tightening.
Isabel Schnabel highlighted the surge in gas and other energy prices on Monday, while Martins Kazaks argued that last week’s increase to 2.50% need not be the last.
Today’s German ZEW survey will test confidence as those costs rise.
For GBP/EUR, tomorrow’s UK inflation figures could alter the relative interest-rate outlook, with 1.17 remaining the nearby level to regain.
Japanese Yen (GBP/JPY) – 208.56493 (+0.05%)
The Yen eased as higher US yields competed with expectations of a Bank of Japan rate increase on Friday.
Speculators have moved net long Yen for the first time since February, making the policy announcement important for an already anticipated tightening move.
GBP/JPY remains down 3.27% over one month, despite its small daily rebound.
A hike accompanied by firm guidance could sustain Yen demand; a cautious outlook would leave room for some of its recent gains to unwind.
Australian Dollar (GBP/AUD) – 1.891487 (+0.00%)
The Australian Dollar is little changed against the Pound, although it has struggled against the US currency as global bond yields rise.
Markets still assign an 85% probability to an RBA increase to 4.60% on September 29, providing some domestic interest-rate support.
Governor Michele Bullock’s parliamentary appearance on Friday is the next scheduled opportunity to clarify that outlook.
Until then, a more hawkish Fed would put further pressure on AUD even without weaker Australian data.
Canadian Dollar (GBP/CAD) – 1.873147 (-0.19%)
The Canadian Dollar gained against the Pound as elevated oil prices continued to support the energy exporter.
Monday’s inflation report was less dramatic: headline CPI held at 3.0% in August, while the Bank of Canada’s preferred median and trimmed measures averaged 2.0%, also unchanged.
Those figures offer less evidence of widespread price pressure than the oil market alone might suggest.
July wholesale sales are due today, providing another domestic test before the Fed decision changes the global interest-rate outlook.
Swiss Franc (GBP/CHF) – 1.10117 (-0.20%)
The Franc recovered against the Pound, a move consistent with the more defensive trading seen as energy prices and borrowing costs rise.
Its gain remains smaller than the Dollar’s, suggesting investors are not buying every defensive currency equally.
GBP/CHF is still near the upper end of its 30-day range despite today’s decline.
The Fed’s guidance could determine whether higher US returns continue to dominate or whether a further deterioration in risk appetite brings more demand for CHF.
New Zealand Dollar (GBP/NZD) – 2.339349 (+0.12%)
The New Zealand Dollar weakened after electronic retail card spending fell 0.9% in August, adding to concerns about household demand.
Higher borrowing costs are tightening conditions while the RBNZ has sounded cautious about the pace of further rate increases.
Thursday’s GDP release in New Zealand is expected to show growth of just 0.2% in the second quarter.
GBP/NZD has gained 2.25% this month, but its sharp rise leaves it vulnerable to a setback if growth proves stronger than expected.
The Yen leads our one-month currency index at 103.34, while the New Zealand Dollar trails at 97.53.
Sterling stands at 99.45, almost level with the Franc, after losing ground against most of the basket over the period.
The Dollar has recovered to 100.13, above its starting level, as its recent advance reverses earlier weakness.
Chinese Yuan (GBP/CNY) – 9.04152 (-0.24%)
The Yuan’s gain against Sterling is almost identical to the Dollar’s, so the lower cross should not be read as an unqualified vote of confidence in China.
Overnight figures showed industrial production accelerating to 5.2% annual growth in August, but retail sales rose just 0.4%, below expectations.
Stronger factories and weak consumption leave a difficult policy balance for Beijing.
The Fed’s announcement is the next external test, with GBP/CNY already close to the bottom of its 30-day range.
Swedish Krona (GBP/SEK) – 13.1825 (+0.04%)
The Krona is little changed while Sweden’s parties hold coalition talks ahead of Wednesday’s overseas-vote count.
The German ZEW survey is the next economic test, offering a check on business confidence as energy costs rise across Europe.
A stronger reading could help demand for growth-sensitive currencies, but tomorrow’s Fed decision remains a risk.
Higher US yields would make it harder for SEK to regain ground against the Dollar.
Norwegian Krone (GBP/NOK) – 12.5882 (-0.04%)
The Krone held a small gain against the Pound as oil near $107 supported the outlook for Norway’s export earnings.
The benefit is being limited by the wider rise in borrowing costs and caution around risk-sensitive currencies.
A further supply disruption would favour NOK through energy prices, but a hawkish Fed could offset some of that support by strengthening the Dollar.
The heatmap still shows GBP/NOK down about 7.2% this year, despite its more recent recovery.
Singapore Dollar (GBP/SGD) – 1.7137 (-0.08%)
The Singapore Dollar gained against Sterling but weakened against the US Dollar as higher Treasury yields favoured US assets.
That distinction matters: the fall in GBP/SGD is not evidence of a general rally in Asian currencies.
China’s uneven activity figures add uncertainty for regional trade, while tomorrow’s Fed decision will determine how much further US rate expectations move.
For SGD, the immediate risk is another increase in the yield advantage available to Dollar investors.
Mexican Peso (GBP/MXN) – 23.1203 (-0.06%)
The Peso made a small gain against the Pound, but the move offers little evidence of renewed enthusiasm for emerging-market currencies.
The main risk is tomorrow’s Fed announcement, which could raise the return investors demand for holding currencies outside the Dollar.
A hawkish outlook would make it harder for MXN to extend gains, while a more cautious message could offer relief.
The size of today’s move calls for restraint before treating it as a change in trend.
South African Rand (GBP/ZAR) – 21.9851 (+0.2%)
The Rand remained under pressure after losing more than 1% against the Dollar on Monday as oil prices rose.
More expensive imported energy and stronger US interest-rate expectations are an uncomfortable combination for South African assets.
The Fed decision is the next major external test, with further tightening signals likely to weigh on demand for the currency.
GBP/ZAR has risen about 1.5% over five trading days, showing that today’s weakness extends a move already under way.
Indian Rupee (GBP/INR) – 129.15706 (-0.18%)
The Rupee’s gain against the Pound masks continued weakness against the Dollar as higher oil prices increase pressure on import costs.
State-run banks were seen selling Dollars on Tuesday, likely on behalf of the RBI, as USD/INR approached its strongest levels in a month.
That apparent intervention may restrain volatility, but it does not remove the pressure from energy prices and US yields.
The Fed decision will test how much further Dollar demand builds despite the central bank’s efforts.
The five-day figures show the largest Pound Sterling gains against the Kiwi, Rand and Swedish Krona, while GBP/USD and GBP/CNY have both fallen around 0.6%.
Over September, GBP/NZD is up more than 2%, but GBP/JPY remains down about 3.6%.
Those differences leave this week’s central-bank decisions capable of sending the major Pound crosses in different directions.
Today’s Key Events and the Week Ahead
- Tuesday, 10:00 BST: German ZEW economic sentiment survey.
- Tuesday, 13:30 BST: US Empire State manufacturing survey and Canadian wholesale sales.
- Wednesday, 07:00 BST: UK August consumer price inflation, ahead of the Bank of England decision.
- Wednesday, 19:00 BST: Federal Reserve decision and updated economic projections.
- Thursday in New Zealand: Second-quarter GDP, with growth of 0.2% expected.
- Thursday, 12:00 BST: Bank of England policy decision.
- Friday: Bank of Japan policy decision and RBA Governor Michele Bullock’s parliamentary appearance.
