FOREX-Jobs Figures Send the Euro and Sterling Higher; the Dollar Falls Ahead of CPI.
The euro and sterling rose against the dollar as UK basic pay growth accelerated and eurozone employment increased faster than expected, highlighting the region's labour market's resilience and tightness.
Despite slowing economic growth, the number of people with jobs in the eurozone increased by 0.4% quarter on quarter, twice as fast as economists polled by Reuters expected.
In the United Kingdom, data show that the rate of growth in basic pay accelerated again in the final three months of 2022, despite a cooling labour market. The Bank of England (BoE) is closely monitoring the rate of pay growth in the United Kingdom as it determines how much higher to raise interest rates.
"With the Bank of England having already signaled on numerous occasions that a tight labor market remains a threat to price stability," said Stuart Cole, a head macro-economist at Equity Capital.
Money markets are pricing in an 80% chance of a quarter-point percentage point hike by the Bank of England in March and a 74% chance of a 50 basis point hike by the European Central Bank in March.
By 1055 GMT, the euro was up 0.3% against the dollar, trading at $1.0756, after falling 2.56% since reaching a ten-month high of $1.1034 on February 2. Sterling gained 0.4% to $1.2192 after briefly exceeding an 11-day high against the US dollar.
CPI in the United States NEXT
The dollar index, which compares the US currency to six major rivals, fell 0.18% to 103.03 ahead of a closely watched inflation report, while the yen rose as a surprise pick. Kazuo Ueda has been nominated as the next governor of the Bank of Japan.
Markets are looking to U.S. consumer inflation data for more clues on the Federal Reserve's policy outlook, with the headline figure expected to have risen by an annual 6.2% in January, following a 6.5% increase in December, according to a Reuters poll.
According to Moh Siong Sim, a currency strategist at the Bank of Singapore, the debate right now is whether inflation will remain stable at 3% to 4% or fall to 2% in line with market expectations.
The Federal Reserve of the United States raised interest rates by 25 basis points earlier this month, claiming that it had reached a tipping point in its fight against inflation.
Interest rates in the United States are expected to peak at around 5.2% in July and end the year at 4.9%, reversing earlier expectations for the start of more aggressive rate cuts later this year.
The yen in Japan rose 0.1% to 132.27 per dollar. The yen fell sharply last year to a 32-year low of 151.94 per dollar as US interest rates rose and Japanese interest rates remained near zero, but it has since recovered those losses as the Fed looks to pause its tightening and speculation grows that the BOJ will abandon its ultra-easy policy.
Data released on Tuesday showed that Japan's economy avoided recession but recovered much slower than expected in October-December as business investment fell, implying that the BOJ's exit from the stimulus will be difficult.