Sterling jumped after the British economy created jobs at its strongest rate in nearly a year in the three months to November.
The release of the UK jobs data undermined the case for a Bank of England interest rate cut next week. Money market expectations for a 25-basis point rate cut fell slightly to around 62% from around two-thirds earlier in the day.
The UK Jobs reading showed the number of people in employment rose by 208,000 to 32.90 million.
The pound sterling jumped as much as 0.3% to $1.3050, up from around $1.3010 before the data was released. Against the euro, sterling also added 0.3% to 85.04 pence.
On Monday sterling fell to as low as $1.2962 after UK finance minister said at the weekend that Britain would not commit to sticking to EU rules in post-Brexit trade talks.
Purchasing Managers Index surveys on Friday will provide a clue as to whether that an economic rebound following the general election occurred.
Further, there had been some relief as U.S. President and French President seemed to have struck a truce over a proposed digital tax. It seems that two agreed to hold off on a potential tariffs war until the end of the year.
On top of that, Trump is due to deliver a speech at the World Economic Forum in Davos later on Tuesday, and trade and tariffs could be on the agenda. At the same time, US President’s impeachment trial begins in earnest in the Senate on Tuesday.
START TRADINGForex – Sterling jumped after strong UK Jobs
The spread of a pneumonia-like virus in China sparked a sudden bout of risk aversion and rattled world markets. Investors were reminded of the economic damage done by the SARS virus in 2002-2003. Currencies linked to Chinese trade and tourism dropped.
The dollar index was down at 97.481 — near the highest level in a month. Speaking at the World Economic Forum in Davos, U.S. President Trump said negotiations over a phase-two trade deal will start soon. The phase-one deal signed last week with China boosted confidence in the world economic outlook, supporting the dollar.
The euro gained against the dollar, holding a narrow range around $1.1105 before Thursday’s European Central Bank meeting.
Japan’s yen gained 0.15% to 110.05 per dollar as investors moved into safe-haven assets. Earlier on Tuesday, the Bank of Japan kept its short-term interest rate target at minus 0.1%, as widely expected.
Swiss franc rose to 0.96750 to the dollar.
The Australian dollar taking a knock from the flu worries touched its lowest in over a month at $0.68445.
The New Zealand dollar fell as much as a third of a percent to $0.6589 before recovering some ground.
Spot gold hit a 2-week high of $1,568.35 per ounce but traded 0.2% lower in early deals in London.
Oil prices slid nearly 1%, having earlier gained on the risk of supply disruption in Libya. Brent crude futures fell 1% to $64.60 a barrel, while U.S. crude fell 0.92% to $58.09 a barrel.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money