The market has been surprised by the latest US payroll figures which showed much stronger employment numbers than expected.
Fearing the continuing impacts of Covid-19, analysts had forecast a fall of around 8 million, however, the data showed the US economy added 2.5 million jobs. This is a huge improvement on last month’s record low reading of a 20 million decline. Further details showed the unemployment rate fell to 13.3% versus estimates for closer to 20%.
This data indicates that the worst of the downturn from Covid-19 might be over and it has boosted optimism for a faster recovery. US stocks rallied sharply on the release and other risk assets, such as Sterling, jumped quickly.
As a result, the GBP/USD has continued its recent ascent, rising another cent today and hitting a 3-month high. The GBP/EUR has also made ground back (as the Pound benefits more than the Euro on increases in risk appetite) and is up around 1% today.
In other news, the latest round of Brexit negotiations have shown little progress. It seems that they’ve resigned from the fact they’ll get anything done before the end of June but will keep the door open to further negotiations until the end of October. It remains to be seen whether Boris Johnson will extend the transition period or not and a decision needs to be made before the end June. Any extension would support the Pound as it reduces the pressure of a no-deal exit.