Sterling rallies on jobs data, EUR/USD at 12-month lows
10:23, 16 November 2021
The British pound (GBP) is the best performer among major currencies on Tuesday, as UK employment data came in stronger than expected, fostering expectations of a Bank of England rate hike next month.
The US Dollar Index (DXY) is trading 95.43, the highest level since July 2020, while EUR/USD yesterday fell below the psychological level of 1.14, hitting new yearly lows, after European Central Bank (ECB) President Christine Lagarde reiterated that ECB is in no hurry to hike interest rates.
Among low-yielding currencies, the Japanese yen (JPY) continues to trade at a 12-month low against the greenback and the Swiss franc (CHF) recorded four straight sessions of losses versus the US dollar.
High-beta currencies such as the New Zealand (NZD) and the Australian (AUD) dollars softened after yesterday’s rebound, while the oil-backed Norwegian krone (NOK) is higher as Brent crude oil prices rose overnight.
Elsewhere, emerging market currencies slipped, with the South African rand (ZAR) and the Russian ruble (RUB) down 0.3% against the dollar, while the Turkish lira (TRY) hit new record lows versus the greenback.
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Forex Daily Matrix – 16 November 2021
Forex daily matrix as of 16 November 2021, 10:30 GMT – Credit: Capital.comUS dollar
As of writing, the US Dollar Index (DXY) was last at 95.43 level, flat from previous close, and at its highest level since July 2020.
Yesterday, the New York’s Empire State Manufacturing Index rose from 19.8 in October to 30.9 in November, beating market expectations (22.0), signalling a sharp improvement in the business activity.
Today, October data on retail sales and industrial production will be published. Consensus forecasts retail sales to rise 1.5% on the month, while the industrial production is seen expanding at 0.9% from a month ago, after falling by 1.3% in September due to supply-chain bottlenecks and Hurricane Ida.
Meanwhile, expectations on interest-rate hikes continue to rise. Market-based probabilities indicate there is a 68% chance, compared with 43% a month ago, the Fed will begin to raise interest rates in June next year.
The technical picture of the DXY shows that the 14-day relative strength index (RSI) on the daily timeframe chart is approaching the overbought territory.
DXY technical levels:
- 52-week high: 95.52
- 52-week low: 89.21
- 50-day moving average: 93.79
- 200-day moving average: 92.15
- 14-day Relative Strength Index (RSI): 69.48
British pound
The British pound (GBP) strengthened against all its peers on Tuesday as UK labour data positively surprised market expectations.
GBP/USD was last at 1.34, up 0.4% from previous close, while EUR/GBP slipped 0.4% to 0.84.
Despite the end of the UK government’s job-protection furlough scheme, the number of payrolled employees rose by 160,000 in October from a month earlier and is now above pre-pandemic levels.
The unemployment rate decreased 0.5% to 4.3% for the quarter ending in September, below market expectations (4.5%).
Overall, the UK labour data continues to show strong signs of recovery that raises the likelihood of a Bank of England rate hike in December. The bank’s Monetary Policy Committee indicated in November that higher interest rates would be warranted in the coming months to combat inflationary pressures, if incoming labour market data matched predictions.
Money markets are now fully pricing in (100% probabilities) the bank starts raising interest rates in December, with an implied rate hike of 17 basis point.
GBP/USD technical levels:
- 52-week high: 1.42
- 52-week low: 1.31
- 50-day moving average: 1.37
- 200-day moving average: 1.38
- 14-day Relative Strength Index (RSI): 40.85
Chart of the day: Money markets assign a 100% chance of a UK intereste rate hike in December
Probabilities of rate hikes at the 16 December UK MPC meeting – Credit: CME BoEWatch ToolEuro
The euro was last at 1.1362 against the US dollar, breaking down the 1.1400 psychological level and hitting new 12-month lows.
Speaking at the European Parliament, Lagarde reiterated that the central bank is in no hurry to raise interest rates next year, despite inflation remaining elevated for longer than expected.
Recently, the single currency has also been negatively impacted by a resurgence of Covid-19 cases in Europe, with new daily cases reaching last year’s highs and prompting some countries, such as Austria and the Netherlands, to reintroduce restrictions.
Today, preliminary third-quarter labour market data in the euro area shows an acceleration in employment of 0.9% in September, above an expected increase of 0.8%.
In the daily timeframe chart of EUR/USD, the 14-day relative strength index (RSI) made its entrance into the oversold area.
EUR/USD technical levels:
- 52-week high: 1.2349
- 52-week low: 1.1362
- 50-day moving average: 1.1634
- 200-day moving average: 1.1874
- 14-day Relative Strength Index (RSI): 28.62
Forex Performance Heatmap – 16 November 2021
Forex performance heatmap as of 16 November 2021 10:30 GMT – Credit: Capital.comOther currency pairs (% change from previous close):
- USD/JPY +0.5%
- USD/CHF +0.21%
- USD/CAD +0.10%
- AUD/USD -0.07%
- NZD/USD -0.30%
- USD/MXN +0.02%
- USD/ZAR +0.22%
- USD/TRY +1.31%
- USD/RUB +0.34%
- EUR/NOK -0.23%
- EUR/SEK +0.18%
- EUR/PLN +0.57%
- EUR/HUF -0.11%