LONDON, March 15 – Sterling surged against the dollar on Tuesday as good employment data bolstered the case for a Bank of England rate hike, but dipped against the euro, which was buoyed by optimism around Russia-Ukraine talks.
Britain’s unemployment rate fell more than predicted to 3.9 percent in the three months to January, official numbers indicated, while job openings reached a new high.
Sterling had climbed 0.2 percent to $1.3021 against the dollar by 0925 GMT, after approaching $1.3000 in Asian trading, its lowest level since November 2020.
“This morning’s UK jobs report…confirmed sustained labor market tightness and accelerating wage growth trends, bolstering the case for another Bank of England rate hike on Thursday,” said Francesco Pesole, ING’s FX Strategist.
Money markets have fully priced in a 25 basis point interest rate hike by the Bank of England on Thursday.
Sterling plummeted to a five-week low against a stronger euro and was the last trading 0.4 percent lower at 84.45 pence, with the euro benefiting from lower oil prices as peace talks between Russia and Ukraine allayed some fears of more supply interruptions.
Ukraine’s President Volodymyr Zelensky announced late Monday that talks with Russia would resume on Tuesday.
Analysts agree that European currencies continue to be mostly influenced by emotions around the Russia-Ukraine conflict, with the euro expected to benefit the most from any resolution.
“Recent optimism may assist the GBP/USD avoid a breach below the critical $1.3000 support level, but it will almost certainly continue to exert upward pressure on EUR/GBP, given the euro’s stronger sensitivity to the conflict,” Pesole said.
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