US nonfarm payrolls rose in December as 36,000 jobs were created, though this was well below expectations. The unemployment rate fell to 9%, the lowest level since 2009. The data is generally positive and was well received by the markets. As the US Dollar is considered to be a risk averse currency, the US Dollar fell as a result. The US Dollar is currently trading at low levels against more risky currencies such as Sterling and the Euro.
In the UK a report from the British Retail Consortium showed that UK retail sales rose at the fastest pace for 10-months in January. Consumer spending bounced back from a slump in December and sales rose 2.3% from the previous year, compared with a 0.8% decline in December.
This has contributed to Sterling’s strong performance in recent weeks, along with strong manufacturing and construction. Analysts are expecting an interest rate rises certainly by the end of the year, as the UK recovers from recession and suffers from inflation.
An analyst from Citigroup said that “Sterling has been going from strength to strength recently on the back of renewed expectations of Bank of England rate hikes in the coming months”.
This week will be notable for the Bank of England interest rate decision. No change is expected this time and we will find out how members of the Monetary Policy Committee will vote two weeks later. However the odds of an interest increase are rising, so each interest rate decision will be more closely scrutinised.
In other news Australia’s retail sales rose by 0.2% in December, which was below expectations. This backed up the Reserve Bank of Australia’s statement last week which suggested that retail spending will be cautious. As most economic data is likely to be affected by the country’s floods, the Australian Dollar is under some pressure. However it is still performing well against the US Dollar and Sterling under these unusual circumstances.
