UK employment data boosts the pound

October 16, 2013

Nothing new has emerged so far on the US debt ceiling talks less than a day before the deadline when the US government will no longer have the ability to borrow money, putting it risk of defaulting on its obligations. Warren Buffett compared the debt ceiling to the “atomic bomb”.

Investors are being cautious and are still hopeful that a deal will be reached at the last minute. This comes after Senator Harry Reid made assurances 48 hours ago that a deal was near. 

As a result, markets are not as jittery and appear to be relatively calm, even after a brief bombshell announcement from Fitch Ratings agency yesterday that it could downgrade  the nation’s top AAA credit rating.

Meanwhile, assurances from Washington are helping limit dollar losses and it has been trading close to a two-week high against the yen in the last two days.

The dollar /yen was up 0.2 percent at 98.35 yen and close to a two-week high of  98.73 hit on October 1st.

Sterling was the best performing major currency  today as a result of a boost by an upbeat UK employment report. The number of jobless Britons fell by the most since 1997 and more than half that was forecast. Cable rose to a one-week high of $1.6060.

The euro was up as well today, moving off yesterday’s low by over 70 pips and peaking at $1.3534 in the European session today. Euro zone CPI data showed no surprises so it had little effect on the currency.

The US session has very little key data releases due to the US government  shutdown but any headlines from Washington would be a big mover for FX markets.

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