FX Roundup: Pound edges higher, commodity currencies reverse losses

The pound sterling edged higher on Wednesday following positive jobs data, while commodity linked currencies reversed earlier losses over afternoon trading in Europe.

UK unemployment fell by 60,000 between October and December to 1.69m, according to the Office for National Statistics.

The rate of unemployment remained unchanged from a month ago at 5.1%; a decade-long low. Over 31.4m people are in work, the highest figure since on record since the ONS began the current data series in 1971.

At 1626 GMT, the pound was up 0.15% against the dollar to $1.4328, while the euro was broadly flat, down a mere 0.03% changing hands at $1.1134.

European Central Bank President Mario Draghi set the tone for week calling for fiscal stimulus, where possible, and structural reforms to be added to the Eurozone policy-mix.

In his testimony before the European parliament on Monday, Draghi said, “Other policies should help to put the euro area economy on firmer grounds. It is becoming clearer and clearer that fiscal policies should support the economic recovery through public investment and lower taxation.

“In addition, the on-going cyclical recovery should be supported by effective structural policies. Compliance with the rules of the Stability and Growth Pact remains essential to maintain confidence in the fiscal framework.”

The dollar continued its uptick against the yen, rising 0.22% to JPY114.32. Jane Foley, senior FX strategist at Rabobank, said the value of the yen is set to drop on any hint of recovery in market sentiment as demand for higher yielding currencies returns.

“Although there are likely to be periods of improved risk appetite, the deep rooted concerns over the outlook for China could persist for years. The implication is that the JPY is likely to remain relatively well bid and we have lowered out forecasts for USD/JPY.

“On the assumption that the US Federal Reserve can still hike rates again this year, we expect some upside in USD/JPY this year to 120 on a 12 mth view, but downside risks prevail," Foley concluded.

Elsewhere, commodity linked currencies were on the rise in Europe, coupled with extreme volatility in the oil markets and metal futures staying on mixed turf.

The greenback fell 0.44% against the Canadian dollar exchanging at CAD$1.3895. Meanwhile, the Australian dollar rose 0.89% against the greenback exchanging at US$0.7174, and the New Zealand dollar rose 0.82% on inflation expectations exchanging at US$0.6634.

Finally, in Latin America, the dollar fell against major regional crosses, including the Chilean (down 1.24%), Colombian (down 0.93%), Mexican (down 3.27%) pesos and the Brazilian real (down 1.65%).