Sterling firms on UK jobs beat as yen rallies after record JGB auction

Sterling firmed on Tuesday after a strong UK labour report kept Bank of England rate hike bets alive. The yen also rallied, as Investing.com reports that a record Japanese bond auction pushed the dollar to surrender its gains.

What moved and why

The UK jobs data was the clearest new driver since our last recap. According to investingLive, the August ILO unemployment rate fell to 4.7% against 5.0% expected and a 4.9% prior. Employment rose by 102k, far above the 5k forecast. Average weekly earnings grew 3.7% on a three-month basis, just below the 3.8% expected, while pay excluding bonuses rose 3.7% against 3.6% expected. In its daily preview, investingLive said the report beat expectations across the board and brought forward BoE hike bets. Investing.com reports that the pound edged up as the dollar consolidated.

The yen story has shifted. Our previous recap had the yen lagging as oil lifted US yields. Now Investing.com reports a yen rally after the record Japanese bond auction.

Oil remains the backdrop. The investingLive European wrap says crude surged further amid Houthi attacks on Saudi energy targets and stalled US-Iran negotiations, and that rising oil prices keep weighing on risk sentiment. Later, investingLive relayed a report from Al Araby Al Jadeed that Iran agreed to secret nuclear site visits under a compromise proposal from Qatar and Pakistan, which reportedly already has American sign-off. The report has not been confirmed by other sources in our feed.

The reference fixings

The ECB reference rates for 20 October give a snapshot. GBP/USD fixed at 1.3347, up 0.12% from the 19 October fixing. NZD/USD rose 0.13% to 0.5679. EUR/USD slipped 0.09% to 1.1215, and USD/JPY eased 0.07% to 158.13. USD/CHF fell 0.17% to 0.8236 and USD/CAD fell 0.16% to 1.4051. Over five fixings, USD/CAD is down 1.33% and USD/CHF is down 1.04%. For background on the loonie's run, see our sister site's explainer on commodity currencies and oil.

Charts: GBP/USD and USD/JPY.

Central banks and data in the news

Europe

German producer prices jumped. investingLive reports that September PPI rose 6.7% year on year against 6.2% expected, the strongest since March 2023, with energy the main culprit. On the month, PPI rose 1.9% against 1.5% expected.

The ZEW survey was mixed. Current conditions improved to -35.9 against -45.0 expected, while economic sentiment fell to 28.1 against 30.0 expected. investingLive called the sentiment reading the softest since July.

France still matters. Investing.com reports that short-end US yields edged up as investors digested the French unrest. The ECB also published an interview with Frank Elderson in Die Presse; our feed carries no details of its content.

United States

Housing data disappointed. According to investingLive, September housing starts came in at 1.221M against a 1.305M prior, while building permits were 1.400M against 1.395M. investingLive said high mortgage rates are the industry's big problem. Pending home sales fell 7.3% against a 0.5% drop expected.

Asia-Pacific

investingLive reports that China held rates and the PBOC will run daily overnight reverse repos until 2 November. The same wrap cites a Daiwa view that the BoJ is shifting focus from reaching 2% inflation to keeping it there, with wages holding the key.

What to watch next

• UK CPI on Wednesday. investingLive says hot core figures could strengthen BoE hike expectations further.
• Iran talks. Any confirmation of the reported compromise, given its link to oil.
• Oil and the Gulf. Further Houthi attacks on Saudi energy targets, per investingLive.
• France. Whether the unrest keeps pressure on bond spreads and the euro.