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  • GBP/USD defies gravity in a risk-on environment. 
  • Risk appetite is being supported by hopes of fiscal giveaway under Biden Administration. 

The number of people out of work in the UK has risen to its highest level in nearly five years, with the services suffering the brunt of the job losses as pandemic restrictions weighed on economic activity.

In the three months to November, the UK unemployment rate of 5.0% beat the consensus (5.1%) but was still up on last month’s 4.9%

In total there are now 1.72mln people unemployed, the sharpest annual rise in 11-years.

However, risk appetite is being supported by hopes of a big fiscal giveaway under the Biden Administration which is weighing on the US dollar.

Also, US stocks and risk appetite have been elevated on the back of strong earnings reports. 

In particular, Johnson & Johnson rose 3.6% after the drugmaker forecast 2021 profit above estimates and promised data from its widely watched coronavirus vaccine trial soon

Moreover, net GBP long positions built on the previous week’s surge and as analysts at Rabobank explained, ”optimists are hoping that the UK’s relatively rapid vaccine roll-out will weigh against the prospects of a negative Bank rate and support the country’s economic rebound.”  

Nevertheless, reports that covid related restrictions will continue well into the spring, the analysts at Rabobank argued.

”A round of poor UK economic data has dampened enthusiasm for the pound in the spot market.”

Looking ahead, attention is squarely on the FOMC announcement tomorrow morning.

”Given the current loss of momentum in jobs growth and consumption, it is very difficult to see anything other than a dovish statement and press conference,” analysts at ANZ bank said today.

”That may well perpetuate extended market consolidation in an environment where Biden’s reflationary ambitions are being delayed by Trump’s impeachment trial.”