Sterling has rallied 0.3% following the release of strong UK labour market data for December, including a record-high employment rate. Sterling, in trade-weighted terms is now down only 0.4% from two weeks ago when dovish comments by a three Monetary Policy Council members and a series of weak UK macro data releases saw Sterling fall to a multi-week low. Markets, which this morning were pricing a 75% probability of the Bank of England cuttingrates 25bp at its 30th January meeting, are now only pricing in a 60% probability of a rate cut. The next key data release for markets and the MPC
will be flash PMI data for January due out on Friday.
The Dollar, which for six consecutive sessions had traded in a ridiculously narrow range of just 0.03%, is up nearly 0.2% today thanks in part to modest weakness in Asian currencies and a handful of developed market currencies, including the Australian and Canadian Dollars. This still a very modest move for the Dollar in the greater scheme of things, which is likely to increase the odds of the Federal Reserve keeping its policy rate unchanged next week.
