GBP outperformed its major peers, after the release of much better than expected jobs data prompted market participants to reassess rate hike expectations. The quality of the data was particularly surprising, given the less than impressive macroeconomic data from the UK of late.
Nevertheless, Wednesday’s release showed that the weekly earnings ex-bonus (3m/3m) data grew at its fastest rate since the beginning of 2009. The data point is of particular importance to the BoE and in terms of BoE related comments, BoE's Carney said that surprises in the market could easily alter the timing and magnitude of rate hikes.
It is also worth pointing out that GBP benefited from M&A related flow, after Anheuser-Busch Inbev (NYSE:BUD) said it had made a takeover move for SABMiller PLC (OTC:SBMRY). The aforementioned factor was particularly relevant to the price action by EUR/GBP, which moved below the 200-DMA line.
Despite underperforming vs. GBP, EUR/USD was able to stage a recovery in the second half of the session, largely as a result of USD weakness stemming from the upside by GBP/USD. At the same time, US CPI data was far away from levels that would stir up further calls for a rate hike by the Fed and instead showed deflationary reading for the first time since Jan.
Looking elsewhere, despite the looming risk events, USD/JPY came off the lowest levels of the session after analysts at S&P lowered rating for Japan to A+ from AA- and revised the outlook to stable from negative.