The pound sterling exchange rate entered a correction phase in trading this week. However, sterling's fundamental base gained additional support from the release of UK labour data that outperformed expectations.
When the news was written (January 18), the GBP/USD pair was defensive in the range of 1.3640s and EUR/GBP in the range of 0.8360s. It was based on the data in the market.
The Uk labour data put an extra 184k employees into payrolls by December 2021, more than analysts had forecast. The number of monthly jobless claims in this period was also less than the consensus forecast.
The November 2021 unemployment rate declined from 4.2% to 4.1 percent. Further, that was reinforcing the indications of an improvement in employment in the country of Queen Elizabeth II.
These Conditions Will Support The UK Central Bank Rate Increase
The average earnings plus bonuses index corrected from 4.9 percent in October to 4.2 percent, but the decline was in line with forecasts. The situation like this brings an effect
All of this supports the continued cycle of interest rate hikes the Bank of England (BoE) has begun in December. The labour market appears to remain tight.
Both are after the end of the furlough scheme and the start of the Omicron wave, thus supporting our view that interest rates will be raised from 0.25% to 0.50 percent on February 3.
That opinion was said by Paul Dales, a Chief UK economist at Capital Economics. The UK labour market is likely to remain resilient this year.
Meanwhile, China May Cut The Rate Hike
Regardless, there are still many other catalysts that could affect the pound sterling this week. Elsewhere, the Prime Minister Boris Johnson continues to be pressed to resign.
During that period, a number of important economic data will be released over the next few days. BoE Governor Andrew Bailey will also deliver the public communications on Wednesday.
While the world's central banks share a "rate hike" vision, China's central bank (PBoC) voted against the tide by cutting its one-yearly interest rate for the first time in nearly two years.
The PBoC's move boosted the comdoll rate and the currency was at higher risk. That is why; the U.S. dollar index edged down about 0.1% at the start of the European session (Jan. 17).
Lockdown Is One of the Slow Down Cause in that Country
The latest Chinese economic report showed a slowdown in the fourth quarter of 2021 due to the COVID-19-related lockdown and the debt crisis of real estate companies.
The Retail sales slumped sharpl so far. It is although the industrial production and fixed asset investment performed slightly better than expected.
In response to the slowdown, the PBoC announced a one-year rate cut for medium-term lending facilities for financial institutions by 10 basis points from 2.95% to 2.85%.
The PBoC also lowered its 7-day repo rate from 2.20% to 2.10%. It is even likely to implement the further monetary easing this year, as the wave of lockdown continues and the pace of inflation weakens.
The USD/CNY Pair Slipped Down
Meanwhile, the USD/CNY slipped about 0.1% to a range of 6.3438 in the Asian session. This pair is continuing to be hit at a low record since May 2018.
The Aussie, Kiwi, Loonie and Euro took the advantage of the opportunity to maintain their respective positions. That is a support for low interest rates from the PBoC.
That situation has the potential to support the economy, so demand for commodities and other goods from foreign countries that china is much looking for can also be supported.
It is worth noting that the direction of PBoC policy is contrary to the majority of other major central banks. The two main banks, the BoJ and the ECB, are not actively cutting their interest rates or adding to their bond purchases.
