Forex News
DBS Bank’s Philip Wee reviews recent FX volatility through the Pound, noting that GBP has been more resilient than EUR and CHF since Operation Epic Fury, helped by the UK’s lower exposure to the energy shock and higher policy rates. However, he highlights that GBP has recently underperformed as markets refocus on UK political risks and reassess Bank of England tightening expectations.
Pound resilience gives way to politics risk
"Following the start of Operation Epic Fury, GBP (-1.9%) was more resilient than the EUR (-2.2%) and CHF (-3.8%) in March."
"In April, GBP (+2.9%) outperformed the CHF (+2.3%) and EUR(+1.5%)."
"However, GBP (-0.6%) underperformed the EUR (-0.2%) and CHF(-0.1%) in the first half of May."
"Markets now see GBP facing a reality check as focus shifts from the US-Iran conflict to 10 Downing Street."
"In the end, the GBP’s outlook remains tethered to the escalation or resolution of the Iran conflict, primarily because of how it dictates the USD’s strength."
"UK politics drives GBP when it threatens fiscal solvency in a major way, such as Lizz Truss’s mini-budget crisis in 2022. Like it or not, GBP is still holding on to its post-Operation Epic Fury appreciation, in contrast to EUR and CHF. "
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- Initial Jobless Claims increased to 211K vs. the previous week.
- Continuing Jobless Claims went up to 1.782M.
According to a report from the US Department of Labour (DOL) released on Thursday, the number of US citizens submitting new applications for unemployment insurance increased to 211K for the week ending May 9. The latest print came in above initial estimates and was higher than the previous week’s 199K (revised from 200K).
Additionally, the 4-week moving average went up by 0.750K, bringing it to 203.75K from the revised average of the previous week (203K).
The report also indicated that Continuing Jobless Claims increased by 24K to 1.782M for the week ending May 2.
Market reaction
The Greenback advances modestly amid steady uncertainty in the geopolitical landscape, with the US Dollar Index (DXY) navigating the 98.50 area in a context of widespread lack of direction in the global markets.
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
- US Retail Sales increased by 0.5% in April as anticipated.
- The US Dollar Index clings to modest daily gains above 98.50.
Retail Sales in the United States (US) rose by 0.5% on a monthly basis in April to $757.1 billion, the US Census Bureau reported on Thursday. This reading followed the 1.6% increase (revised from 1.7%) recorded in March and came in line with the market expectation. On a yearly basis, Retail Sales were up 4.9% in this period.
"Total sales for the February 2026 through April 2026 period were up 4.4 percent (±0.4 percent) from the same period a year ago," the press releases noted. "The February 2026 to March 2026 percent change was revised from up 1.7 percent (±0.4 percent) to up 1.6 percent (±0.2 percent)."
Market reaction
The US Dollar (USD) stays resilient against its rivals following this report. At the time of press, the USD Index was up 0.13% on the day at 98.58.
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