FX Update: GBP shrugs off bad employment numbers.

Today's Saxo Market Call podcast

FX Trading focus:

• Ugly UK payrolls data hits sterling and UK short rates. The latter stuck lower while sterling impressively rebounded. Key zone of uncertainty for GBPUSD here.
• USD traders awaiting US Retail Sales data today and debt ceiling talks.

Trading bias notes:

• USD: Key event risks today including Retail Sales and US debt ceiling talks. EURUSD bears will want 1.0900 to provide resistance, although no real reversal unless we pull back to 1.1000.
• NZD: After big reversal, bears may continue to fade NZDUSD rallies that stay short of 0.6300 area. AUDNZD heavy after Chinese data – needs to find support near 1.0700 or this bounce from recent lows looks endangered.
• GBPUSD: impressively brushed off very ugly numbers today. Risk reward for bears to test short case from here to perhaps 1.2575 (abandoning above 1.2600) or to wait for follow through below 1.2450.
• EURSEK: noted good risk/reward for testing short case yesterday in 11.30 area, but no follow through on sell-off and sub-11.25 attempt this morning. Now neutral.

Sterling: somehow ignores ugly employment data.
A few surprising UK employment numbers rolled in this morning, include a massive drop in the “payrolled employees” data that PAYE sends out to -136k. The number is so bad that one can’t help but imagine there might be a revision, but many job categories saw weakness, so there revision would have to be extreme to erase the concerning signal. The April Jobless claims number was also a worry, jumping unexpectedly to 46.7k vs. +26.5k in March. That’s the worst number since the volatile data of early 2021 and above the pre-pandemic range of monthly claims. UK 2-year rates were marked about 10 basis points lower and sterling initially dropped sharply, only to recoup all of its losses and then some even while the reaction in rates largely stuck lower. I am putting sterling on negative watch after this data point, but EURGBP certainly not cooperating yet on that account. More on GBPUSD thoughts below.

Chart: GBPUSD
GBPUSD once again found support, this time just before hitting on the critical 1.2450 area in the wake of the weak employment data today and rallying back to where it came from above 1.2500. To neutralize this recent sharp sell-off/bearish reversal, the pair needs to retake 1.2600+. Barring that development, the more compelling technical area now after this morning’s downside test is the 1.2450 zone that could open up for a deeper sell-off as newly arrived bulls will be disappointed that the recent attempt above the former cycle high of 1.2450 failed to hold, also stimulating fresh bearish interest.