The pound to US dollar exchange rate has strengthened during the early Tuesday morning in Europe following the release of upbeat UK data. UK claimant count change fell to -56.9K and the unemployment rate was also lower to 3.7%. The positive numbers have boosted sentiment with traders expecting further upside.

At the same time, there is some unease ahead of a speech from Fed Chairman Jerome Powell, as well as any Brexit announcements that could limit potential gains for the British currency.

Claimant count change for April

The UK claimant count change for April dropped below the -38.8K which was forecast and the -46.9K in previous readings to -56.9K. The claimant count change refers to the additions in the unemployed labour force who have applied for jobless benefits. Today’s reading demonstrates a tight labour market.

ILO Unemployment Rate falls to 3.7% in March

On Tuesday, it was reported by the UK's Office for National Statistics that the ILO unemployment rate fell to 3.7% in the three months to March from 3.8%. The reading was slightly lower than the market expectation of 3.8%. The ILO unemployment rate released by the National Statistics refers to the number of unemployed workers divided by the total civilian labour force. It is an important indicator for the UK economy and the labour market in particular and shows lack of expansion and a weak economy when the rate is up, while a decrease of the number is considered positive. It is worth to note that here is a substantial reverse correlation between unemployment and inflation. A higher-than-expected unemployment rate tends to push the pound lower.

Also released today, was the average earnings including bonus and excluding bonus which rose by 7% and 4.2%, respectively, on a yearly basis.

The optimistic UK employment numbers reinforce market expectations for faster rate hikes bybthe Bank of England (BOE). However, analysts noted that this has been priced in and that the pound could find further direction from new developments. Sterling was also supported by a slightly weaker US dollar as market sentiment recovered following Covid headlines from China and disappointing US data and Fedspeak.

What to look forward to today

Looking forward, today’s speech from Fed Chairman Jerome Powell will be important for the GBP/USD currency pair with markets anticipating Powell to defend a 50-bps rate hike. If he does not mention this, the US dollar could weaken.

At home, UK PM Boris Johnson is expected to release details of changes to the Northern Ireland Protocol (NIP). The PM has confirmed he will propose legislation to overrule the Northern Ireland protocol, despite warnings from Brussels and a request from the Bank of England not to initiate a trade war with Europe. The prime minister said his government wanted to “fix” the protocol and not to “scrap it.”

With the current volatility and weak market sentiment, contacting a currency specialist will allow you to safeguard your business and finances by planning ahead. If you are a business transferring funds overseas, get in touch with Universal Partners FX and their dedicated team to discuss the latest market movements ahead of your currency exchange. Universal Partners FX can provide invaluable help on efficient risk management and tailored solutions to your business’ transfer needs.