Festive Jobs Blowout Sends Pound Sterling Higher

Stocks

Summary:

A strong set of employment figures took pressure off the Bank of England to cut interest rates next month, boosting the British Pound in the process.

The Pound-to-Euro exchange rate rose to 1.2050 in the minutes after the ONS said the UK unemployment unexpectedly held steady at 4.4% in December, which is below the consensus expectation and the Bank of England's forecast of 4.5%.

This was after employment accelerated to 107K in the three months to December, from 36K in November, beating the consensus estimate for +48K.

Reflecting the tight labour market, regular pay rose 5.9% year-on-year in December, meeting expectations but representing the fastest increase since April 2024. Overall pay, which includes bonuses, rose 6.0%, ahead of expectations for 5.9% and the fastest increase since November 2023.

The Pound-to-Dollar exchange rate rose to 1.2619 in the minutes of the release.

“The UK Labour market tightened a bit more than expected over the Christmas period, with unemployment lower than feared and wages rising. However, we worry that this proves a final festive blowout ahead of a painful Spring," says Nicholas Hyett, Investment Manager at Wealth Club.

The financial market reaction suggests these data will increase the pressure on the Bank of England to cut interest rates again next month, raising the odds that the next cut will occur in the second quarter."This report is a reminder that the Bank of England's job is not done and there is still some way to go in eradicating inflationary persistence. 6% wage growth in a period of negative productivity growth is self-evidently inflationary," says Kyle Chapman, FX Markets Analyst at Ballinger Group.

Markets had been prepared for a weaker set of figures owing to a steady deterioration in labour market dynamics reported by various surveys.

This month saw the Bank of England cut interest rates by 25 basis points and two members of the voting committee opt for a 50bp cut, judging the economy was deteriorating faster than expected.

However, Tuesday's numbers will give a reason for ongoing caution at the central bank, as the strong wage pressures imply ongoing inflationary forces are in play.

Festive Jobs Blowout Sends Pound Sterling Higher_1

Above: GBPUSD at five-minute intervals following the release of UK wage and employment data.

These labour market figures confirm then UK saw a strong turn to the year, but economists warn the real test looms as a series of minimum wage hikes and increases to employer taxes come into effect.

"The supermarket sector has already reported job losses, and others are expected to follow as the changes approach," says Hyett.

Highlighting waning demand for staff, the ONS says vacancies available in the economy fell by 9,000 in the month to January to 819K.

Festive Jobs Blowout Sends Pound Sterling Higher_2

"The continued decline in job vacancies points to low business confidence in hiring new staff," says Alex Hall-Chen, Principal Policy Advisor for Employment at the Institute of Directors.

"The cumulative impact of recent employment reforms, coupled with upcoming increases to employer National Insurance Contributions and the National Living Wage, is significantly weakening the business case for hiring," he adds.

However, analysts at Pantheon Macroeconomics think the labour market is proving more resilient than many of the economic surveys had hinted.

"We expect structural labour market changes to keep private pay growth still running above 4% year-over-year at the end of this year," says Rob Wood, Chief UK Economist at Pantheon Macroeconomics.

Given this, Pantheon Macroeconomics join peers that warn the Bank of England won't be in a position to cut interest rates much farther.

"We look for the MPC to be cautious, cutting rates only two more times this year, in May and November," says Wood.

This cautious approach will ensure ongoing support for UK bond yields, which would mechanically support Pound exchange rates, fortifying the currency's outlook.

Source: Poundsterlinglive

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ING

Economic

Forex

The dollar continues to trade on the softer side after Friday's soft US January retail sales questioned the strength of US activity. USD/JPY has been in the vanguard of this dollar correction and Japan's stronger GDP data is helping today. However, speculators are now getting reasonably long JPY again. Overall we see no reason for a much weaker dollar.

USD: Sizing the correction

The DXY dollar index is down just over 3% from its early January high. There is a sense that US President Donald Trump's bark is worse than his bite when it comes to trade (Mexico and Canada given a temporary reprieve on tariffs) plus Friday's release of January US retail sales data warns that US growth is starting 2025 on a softer footing.

At the same time, some overseas economies – such as Japan – have been showing better-than-expected growth. However, it may not be lost on the White House that a lot of that fourth-quarter Japanese growth was driven by net exports. This will add to the view that trading partners are dining out on US demand. For reference, Japan comprised $68bn of the $1.2tr US goods trade deficit in 2024.

The question is: how much further does the dollar need to correct? We are in the camp answering: 'not much'. It is clear that the threat of tariffs has not receded and that the broad foundations laid for 'reciprocal' tariffs announced last week mean that substantial tariffs will be coming probably in the second quarter. Tariffs are positive for the dollar – even though the dollar already rallied 10% between October and January.

Unless you have a strong conviction that US activity data is going to decelerate sharply from here, to us it looks like we're getting towards the end of this dollar correction. We suspect that something like the 106.00/106.35 area will mark the low point for DXY in the first quarter. Please see our latest edition of FX talking for all our latest FX forecasts.

In terms of events this week and after today's Presidents' Day US public holiday, attention will turn to events in Saudi Arabia and Europe as US, Russian, and European leaders discuss how to end the war in Ukraine. The US data calendar is pretty light this week, with just FOMC minutes on Wednesday and business and consumer confidence figures on Friday standing out.

EUR: Soul-searching

There is a lot of soul-searching underway in European capitals as leaders come to terms with last week's shock new direction for US foreign policy. Having been shut out of negotiations in Saudi Arabia this week, European leaders are meeting in Paris to define a position. One of the big questions will be what to do about defence spending. Will they target 3.0/3.5% of GDP on defence spending and suspend fiscal rules to allow that to happen? If so, that should mean higher long-term European interest rates, and perhaps there were some early signs of that on Friday when European bond yields did not follow US Treasury yields lower on the softer US retail sales data.

While moves towards a ceasefire in Ukraine have been helping EUR/USD at the margin, the prospect of increased US isolationism certainly does not look a positive for the euro. And a much higher EUR/USD from here probably requires a conviction on some much softer US activity data – a conviction we do not have.

We remain of the view that this EUR/USD correction will probably peter out somewhere in the 1.0535/75 area and stick with the view that EUR/USD will be back at 1.03 in a month's time.

On the eurozone calendar this week are consumer confidence on Thursday and the flash February PMIs on Friday. The focus will also be on the run-up to the weekend elections in Germany, where a very tight result and a delay in forming a coalition would likely be seen as a euro negative given the lack of leadership in Europe currently.

GBP: Focus on Tuesday's jobs data

This year's FX markets have told us not to chase big definitive headlines or range breakouts. We think this applies to GBP/USD at 1.2600/2610. We think this is an important resistant area. Rather than pushing strongly ahead, we suspect GBP/USD gains will fade and these levels will be looked back on as an area to increase sterling hedge ratios for the year.

Away from the politics of US foreign policy, sterling's focus this week will be on jobs data, CPI and a speech from Bank of England Governor, Andrew Bailey, tomorrow morning. Expect more focus on the jobs data given Monetary Policy Committee former hawk Catherine Mann's focus on a 'non-linear' adjustment in UK employment.

We continue to doubt that GBP/USD can sustain gains over 1.26 and expect it to be trading back at 1.24 by the end of March.

CEE: Peace deal may also imply ultimately weaker FX rates

After several busy weeks in Central and Eastern Europe, this week should be quieter at least on the macro side. Today sees the release of the Czech PPI, which has surprised to the upside in the last two releases. The central bank is also watching rising agriculture prices, opening up risk to food prices.

On Thursday, Poland will release labour market data including wages and industrial production. While recent PMI readings give some ground for optimism, industrial activity remains subdued and the ongoing recession in Germany is weighing on Polish manufacturing. Industrial output remains stagnant, with annual changes swinging from positive to negative, depending on the calendar effect. On Friday we will see consumer confidence in the Czech Republic.

On the political side, we'll mainly be watching developments around the Ukraine peace deal, which is currently the main driver for the markets. And in Hungary, we'll be watching the annual Fidesz party congress on Tuesday and Wednesday, where we'll hear what to expect this year to support weak economic growth and plans for next year's elections, often watched by financial markets.

Markets have clearly been focused on the Ukraine peace deal for the last two weeks and that should probably be the case this week as well. We think that in the short term, positive sentiment will continue to support stronger FX. But once sentiment calms down, markets are indicating tighter rate differentials across the board.

Should the war in Ukraine end, CEE countries should get a boost from lower energy and food prices, which should allow for more rate cuts from central banks. At least that is the narrative the market will trade looking forward. Expectations of lower rates should also mean weaker FX at the end of the day. Of course, this is not the story now – but we think there will be a moment where the current strong FX levels in the CEE region begin to fade.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Owen Li

Forex

Economic

The US Dollar Index may face challenges as the 14-day RSI remains below 50, signaling increased bearish bias.

The primary key support appears around the descending channel’s lower boundary at 106.30.

The DXY may target its primary resistance at the nine-day EMA of 107.34

The US Dollar Index (DXY) ticks higher on Tuesday, hovering around 107.00 during European trading hours after three consecutive sessions of losses. The daily chart indicates a prevailing bearish bias as the index remains confined within a descending channel.

The 14-day Relative Strength Index (RSI) sits below the 50 mark, signaling strengthening bearish momentum. Additionally, the DXY remains below the nine- and 14-day Exponential Moving Averages (EMAs), reinforcing weak short-term price momentum.

On the downside, the US Dollar Index may test the lower boundary of the descending channel at 106.30, followed by psychological support at 106.00. A break below this level could deepen the bearish trend, potentially pushing the index toward the three-month low of 105.41, recorded on December 6.

Conversely, immediate resistance lies at the nine-day EMA of 107.34, followed by the 14-day EMA at 107.54. A decisive break above these levels could improve short-term momentum, opening the door for a move toward the upper boundary of the descending channel at 109.50, with further upside potential toward the five-week high of 109.80, last tested on February 3.

US Dollar Index: Daily Chart

US Dollar Index Price Forecast: Holds Gains Around 107.00 Despite Increased Bearish Bias_1

US Dollar PRICE Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the New Zealand Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.17%	0.06%	0.35%	0.04%	0.07%	0.48%	-0.04%
EUR	-0.17%		-0.11%	0.21%	-0.13%	-0.11%	0.31%	-0.21%
GBP	-0.06%	0.11%		0.31%	-0.02%	-0.00%	0.41%	-0.11%
JPY	-0.35%	-0.21%	-0.31%		-0.32%	-0.30%	0.10%	-0.41%
CAD	-0.04%	0.13%	0.02%	0.32%		0.02%	0.44%	-0.09%
AUD	-0.07%	0.11%	0.00%	0.30%	-0.02%		0.42%	-0.14%
NZD	-0.48%	-0.31%	-0.41%	-0.10%	-0.44%	-0.42%		-0.52%
CHF	0.04%	0.21%	0.11%	0.41%	0.09%	0.14%	0.52%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

Source: FXSTREET

To stay updated on all economic events of today, please check out our Economic calendar

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Warren Takunda

Stocks

London stocks were a smidgen higher in early trade on Tuesday as investors mulled the latest UK jobs data.

At 0835 GMT, the FTSE 100 was up 0.1% at 8,772.00.

Figures released earlier by the Office for National Statistics showed that pay growth accelerated in the three months to December, while the unemployment rate was steady.

The unemployment rate was unchanged at 4.4%, versus expectations for it tick up to 4.5%.

Average earnings including bonuses rose by 6% on the year, up from 5.5% in November. Excluding bonuses, wages grew 5.9% - the fastest rate in eight months - up from 5.6%.

Liz McKeown, director of economic statistics at the ONS said, said: "Growth in pay, excluding bonuses, rose for a third consecutive time, with increases in both the private and public sector."

The figures also revealed an estimated 819,000 vacancies in November 2024 to January 2025, down by 9,000 from August to October 2024.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: "Today’s UK wage data came in mixed - December’s growth was slightly stronger than the economists had expected but fell short of the Bank of England's forecast.

"There’ll be debate about whether this is a signal to worry about inflation again, but reading between the lines, this shouldn’t hinder the Bank of England’s plans for a gradual reduction in rates over 2025, with markets still anticipating a couple of cuts by year-end."

In equity markets, Antofagasta gained as the copper miner reported an 11% jump in full-year earnings before interest, tax, depreciation and amortisation and said demand for copper remained strong.

Glencore rose as Morgan Stanley upgraded shares of the miner to ‘overweight’ from ‘equalweight’ and said it was its new "top pick".

On the downside, BT Group slid after a downgrade to ‘sell’ from ‘buy’ at Citi, which cut its price target to 112p from 200p as it noted that Openreach was facing a revenue decline. Airtel Africa also lost ground after a downgrade to ‘neutral’ from ‘buy’ by the same outfit.

InterContinental Hotels was in the red despite posting a rise in full-year profits, lifting its dividend, and announcing a $900m share buyback programme and the acquisition of the Ruby brand for $116m.

BHP was trading down as it slashed its dividend and reported a sharp fall in half-year profits as lower iron ore prices caused by weaker demand from China offset higher copper earnings.

Plus500 slumped even as it announced a $110m share buyback and hailed strong full-year results.

Source: Sharecast

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Justin

Stocks

The BSE Sensex fell 360 points, or 0.5%, to 75,626 in early trading on Tuesday, touching its lowest level in three weeks after edging up in the previous session.

Weak Q3 earnings results and ongoing foreign fund outflows continued to dampen sentiment.

Caution also built amid global trade uncertainty and a widening trade deficit in January, while the US stock market was closed on Monday for a holiday.

However, traders were anticipating the release of China's monthly key lending rate fixes, the FOMC minutes, and speeches from several Fed officials to guide the central bank's policy path.

Almost all sectors traded in the red, with consumer durables, metals, and autos seeing the biggest losses.

The Nifty 50 fell 0.6% to below 22,900, with notable losses from Mahindra & Mahindra (-1.8%), IndusInd Bank (-1.7%), Adani Ports (-1.7%), Tata Motors (-1.5%), and Tata Steel (-1.5%)

Source:Trading Economics

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Owen Li

Economic

The dollar firmed on Tuesday as traders weighed tariff worries and the path to U.S. rate cuts, while the Australian dollar held steady near two-month highs after the Reserve Bank of Australia delivered an expected rate cut but cautioned on further easing.

The RBA cut its cash rate by 25 basis points to 4.10% on Tuesday in its first easing since the 2020 pandemic, but was cautious about prospects of further policy easing.

That left the Australian dollar steady at $0.6351 after an initial burst of choppiness following the decision. The Aussie touched a two-month high of $0.6374 on Monday and is up 2.4% in February on easing trade war worries.

Prashant Newnaha, a senior Asia-Pacific rates strategist at TD Securities, said the RBA's statement struck the right balance without boxing in the central bank to delivering a follow-up cut. "That said we retain our forecast for cuts in May and August."

Swaps imply just a 20% probability for a follow-up cut in April, although a move in May is still almost fully priced in. (0#AUDIRPR)

Speaking at a media conference, Australia's top central banker Michele Bullock said market pricing for two more quarter-point cuts this year was ambitious and policy makers were more cautious about the outlook.

Kerry Craig, global market strategist at J.P. Morgan Asset Management said the RBA's move looks more like an "insurance" cut, which keeps it in step with global central banks, rather than the start of an aggressive easing cycle.

"This easing cycle will certainly not be a sprint to the end, but rather a slow walk on the path towards lower rates and further cuts ahead."

Investor focus this week will be on Wednesday's release of minutes of the Federal Reserve's meeting in January to gauge how policymakers have sought to weigh the risk of a broader tariff war in the wake of President Donald Trump's trade policies.

Data last week showed U.S. consumer prices increased at the fastest pace in nearly 18 months in January, reinforcing the Fed's message that it was in no rush to resume cutting rates amid growing economic worries.

"Trade policy uncertainty is at a record high ... and given that the labour market is solid, there is no compelling case to cut rates imminently," ANZ strategists said in a note.

"An extended pause during the first half of this year looks justified and will give the Fed time to assess the impact of trade measures on inflation."

ANZ now expects rate cuts to resume in the second half of 2025, with a further 75 bps of easing anticipated. Markets though are not as optimistic, with traders pricing in 40 bps of cuts for this year.

In Asia, the yen was on the back foot after its recent gains as strong growth data bolstered odds of the Bank of Japan raising interest rates again this year, with July seen as a live meeting.

The yen was last at 152.165 to the dollar, down 0.4% on the day. Japan's solid October-December GDP data on Monday, coupled with recent inflation numbers, have helped lift the yen. It is up nearly 4% against the dollar so far in 2025.

The dollar index , which measures the greenback against six other major currencies, was 0.27% higher at 107.01, still not far from the two-month low of 106.56 it touched on Friday.

The euro was 0.27% lower at $1.045475, while sterling eased 0.2% at $1.2593 as traders braced for talks in Saudi Arabia later on Tuesday aimed at ending the Ukraine war.

The New Zealand dollar fell 0.55% to $0.57195 ahead of the Reserve Bank of New Zealand meeting on Wednesday, where the central bank is widely expected to cut rates by 50 bps.

Source:Reuters

To stay updated on all economic events of today, please check out our Economic calendar

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Justin

Economic

Stocks

Acting President Choi Sang-mok presides over a Cabinet meeting at the Government Complex Seoul, Tuesday.

Securities firms required to prevent naked short selling, or face penalties

Authorities have mandated measures to prevent naked short selling for corporations and securities firms ahead of the resumption of short selling next month, according to the Financial Services Commission (FSC) on Tuesday.

The country’s financial regulator said violations would result in penalties and fines of up to 100 million won ($69,000).

In addition, short-selling conditions will be standardized to ensure that retail investors are not disadvantaged compared to institutional and corporate investors.

These regulatory improvements are included in the revised enforcement decree of the Capital Markets Act, which was approved at a Cabinet meeting earlier in the day and will take effect on March 31 when short selling is scheduled to fully resume.

Korea imposed a ban on short selling in November 2023 after uncovering a series of naked short selling violations involving several global investment banks. The ban was originally set to expire at the end of June 2024 but was pushed back to March 31 this year.

Under the revised rules, corporations intending to short sell listed stocks must establish internal control standards to prevent naked short selling, which involves selling shares before securing a borrow.

Corporations that meet the disclosure threshold — holding short positions of at least 0.01 percent of outstanding shares or 1 billion won — along with market makers and liquidity providers must manage short positions on a per-stock basis and establish an electronic system to prevent naked short selling.

Additionally, these institutions are required to submit daily stock-by-stock short position data to the Korea Exchange’s central monitoring system within two business days.

Even if naked short selling does not occur, corporations and securities firms that fail to comply with preventive measures will be subject to fines of up to 100 million won. For securities firms and other financial investment companies, sanctions may also be imposed on the institution and its employees.

Short-selling orders executed on the alternative trading system (ATS), set to launch in March, will be subject to the same short-sale marking requirements as those on the stock exchange.

Korea’s first ATS, Nextrade, is scheduled to launch on March 4.

“We will ensure thorough implementation of the short-selling reform measures as we prepare for the resumption of short selling,” an FSC official said.

Source: Koreatimes

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Festive Jobs Blowout Sends Pound Sterling Higher

Above: GBPUSD at five-minute intervals following the release of UK wage and employment data.

Source: Poundsterlinglive

Don’T Chase the Dollar Correction

USD: Sizing the correction

EUR: Soul-searching

GBP: Focus on Tuesday's jobs data

CEE: Peace deal may also imply ultimately weaker FX rates

US Dollar Index Price Forecast: Holds Gains Around 107.00 Despite Increased Bearish Bias

Source: FXSTREET

London Open: FTSE Nudges Up as Investors Digest Jobs Data

Source: Sharecast

India Stocks Slide to 3-Week Lows

Source:Trading Economics

Dollar firms, Aussie steady after RBA's 'hawkish' rate cut

Source:Reuters

Korea to Resume Short Selling On March 31

Source: Koreatimes

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