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Pound Sterling Turbocharged against Euro and Dollar on U.S. Jobs Surprise and Confirmation that Brexit Trade Negotiations will Continue

Pound Sterling bullish ahead of the weekend

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  • GBP/EUR spot: 1.1226 | GBP/USD spot: 1.2700
  • GBP/EUR bank rates: 1.1012 | GBP/USD bank rates: 1.2444
  • GBP/EUR specialist rates: 1.1125 | GBP/USD specialist rates: 1.2586
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A surprising U.S. employment report that showed the U.S. economy actually added jobs over the course of May and news that the EU and UK remain committed to further trade negotiations served up a dose of optimism for Pound Sterling bulls to latch onto ahead of the weekend.

The UK currency rallied by 0.80% against the Euro and 0.60% against the U.S. Dollar while reversing earlier losses against the New Zealand and Australian Dollars after the UK's Chief Brexit negotiator David Frost said he was actively working with the European Commission to organise a series of face-to-face meetings to break the current impasse in negotiations.

This is a key development as it suggests there are no imminent hard deadlines by which the two sides must agree a post-Brexit trade agreement, with markets giving negotiators a benefit of the doubt that a deal can be struck before year-end when the current transition period runs out.

"Progress remains limited but our talks have been positive in tone. Negotiations will continue and we remain committed to a successful outcome," said Frost in a statement following talks. "We are willing to work hard to see whether at least the outline of a balanced agreement, covering all issues, can be reached soon."

The evaporation of Brexit anxieties combined with a leap higher in global stock markets to boost Sterling valuations: the Pound-to-Euro exchange rate was quoted at 1.1205 following the release of U.S. jobs numbers that showed the country saw employment grow by 2.5 million in May, some 10 million better than the consensus expectations for a decline of 7.5 million.

The unemployment rate fell to 13.3% from 14.7%, far below the consensus, -19.0%.

Stock markets and commodity prices understandably shot higher on the surprise, and that Pound Sterling was in hot pursuit confirms the performance of global markets and broader investor sentiment remains a key driver of value for the currency.

The gains leave Sterling sitting on a 0.75% advance for the week against the Euro, provided optimistic market sentiment extends. The Pound-to-Dollar exchange rate went to 1.2662 meaning the Pound will have advanced 2.67% over the course of the past week if the gains stick to their current levels.

The U.S. jobs data suggests the prospect of a so-called v-shaped recovery for the U.S. economy is indeed possible, and will go some way in cooling anxieties over the global economic crisis caused by the coronavirus.

"The biggest payroll surprise in history, by a gigantic margin, likely is due to a wave of hidden rehiring. Businesses which let people go in large numbers in March didn’t need to post their intention to bring people back on Indeed; they just needed to call/text/email," says Ian Shepherdson, Chief Economist at Pantheon Macroeconomics.

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