The GBP/USD traded with high volatility on Wednesday after the mixed UK jobs figures. The sentiment was generally positive in the market and that powered sterling to rise versus the dollar before stabilizing as uncertainty prevails.
Unemployment unexpectedly dropped in the United Kingdom in the three months ending February to 7.8% from 8.0% which offset the unexpected rise in unemployment benefits which was attributed to the change in benefit rules that increased women unemployment claims.
We saw commodities and equities recovering some losses and woes over Japan subsiding slightly which eased the demand for haven assets and supported risk. We can see the market driven by the sentiment and accordingly the outlook remains highly uncertain. The lack of data from UK on Thursday adds to the volatility in the market and leaves the focus on the G7 meeting in the US for more signals over the outlook.
The pair will be surely affected by the dollar’s movement with data released from the US. At 12:30 GMT which are expected marginally stable from the previous week at 380 thousand. The focus though remains more on the inflation figures with factory gates also due at the same time. The PPI is expected steady with an annual 0.2% and that will weaken the dollar further on subdued inflation threats and accordingly power majors on the back of the prevailing diversification from the dollar as investors see prolonged loose monetary policy in the US.
High volatility will prevail and the change of sentiment to positive on Wednesday might not prevail unless further support was provided the market to ensure that the beginning of the week was merely a short lived correction and will not continue for long. The general outlook still favors sterling over the dollar, yet high volatility will prevail especially with inflation figures Thursday and Friday from the US providing new insight for the Feds monetary policy outlook.
Originally posted here
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