The British pound was one of the few currencies to actually rally against the US dollar on the belief that US rates will fall much faster than UK rates this year.
Economic data from the UK this morning was stronger than expected with consumer prices rising at a faster pace than the market expected last month. Despite stronger economic data, we still believe that the British pound will continue to sell off. Employment numbers are due for release tomorrow. The employment components of service, manufacturing and construction PMI all increased in the month of December suggesting that the number of jobless claims will fall more than the -5k forecast. However the number to focus on is average earnings. Softer wage growth can easily offset a larger drop in jobless claims.