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Sterling Set for Biggest Rally in a Single Day


May 15, 2023 #crypto

On Friday, the British pound recorded gains after data showed that there had been more than expected growth in the economy in January, which further alleviated worries of a recession.

Meanwhile, the US dollar dropped after the US labor data turned out to be mixed.

The data

There was a 0.3% expansion in the British economy month-on-month as per the Office of National Statistics (ONS), after it had declined in December by 0.5%.

Growth of 0.1% had been expected by economists. Market analysts said that they were not convinced that the economy would see a technical recession in 2023, which had been predicted earlier.

Instead, they said that the UK economy’s resilience would give sterling good support in the next few months.

There was a 1.2% rise in the British pound against the US dollar, as it was trading at $1.2068. This is the biggest rise it has recorded against the dollar since January 6th.

Dollar weakening

The US labor market data on Friday resulted in broad weakening in the US dollar, as it showed strong growth in jobs, but signs of wage inflation slowing down and an increase in the unemployment rate.

In February, 311,000 new jobs were added, while unemployment rate climbed to 3.6%. There was a 0.2% increase in average hourly earnings, after rising 0.3% in January.

Markets initially reacted to the weaker than expected growth in average hourly earnings. The consumer price data due in the next week would provide a clearer picture about the next moves of the Fed.

The markets

This saw markets amend their bets about the hike in the interest rates. Elsewhere, the markets were reacting to the news of the Silicon Valley Bank shutting down.

Similar to US stocks, European ones also declined and the rout in the bank’s stocks raised concerns about the hidden risks in the banking sector.

Analysts said that if banking concerns continue to plague the market, sterling could see some declines because financial services make up a big portion of the UK economy.

There was a 0.5% drop in the euro against the British pound, as it declined to 88.24 pence, which is the lowest it has been since March 1st.

By admin