The Pound Rallied on Employment Data—Will It Extend Its Gains on the U.K. CPI?

The Pound Rallied on Employment Data—Will It Extend Gains on the UK CPI Report?

21.10.2026 New

In the U.S. currency market the previous day, the U.S. dollar weakened against major currencies as long-term U.S. interest rates and crude oil prices fell from their intraday highs.The Dollar Index fell 0.25% to 101.71, and the dollar-yen pair dropped from its high of 158.59 yen on the 20th to a low of 157.81 yen. Strong demand at Japan’s 20-year government bond auction also bolstered yen buying.The yield on the 10-year U.S. Treasury note fell to around 5.12%, weakening the support for the dollar provided by the interest rate differential. The Canadian dollar also rose against the U.S. dollar, with USD/CAD closing around 1.4067.

European currencies saw the pound strengthen after U.K. employment data came in stronger than expected. With the unemployment rate falling to 4.7% and average wages (excluding bonuses) rising 3.7% year-over-year, speculation grew that the Bank of England would raise interest rates in November.The pound briefly rose above the $1.34 level against the dollar and traded around $1.338. The euro also rose to the low $1.12 range against the dollar, but was weighed down by protests in France and concerns over the country’s fiscal situation. With UK inflation data due out soon, the focus will be on whether the pound’s strength against the euro will hold.

Today’s key economic data includes the release of the UK’s September CPI at 3:00 p.m. The headline index is expected to come in at 3.4% year-over-year, while the core index is forecast at 2.8%; following yesterday’s employment report, this data could influence the outlook for UK interest rates.South Africa’s CPI is scheduled for 5:00 p.m., and the U.S. MBA Mortgage Applications Index is set for 8:00 p.m. The focus will be on the 10:00 p.m. interview with Bank of England Governor Bailey, which will center on central bank independence; attention will be on whether he makes any specific references to monetary policy.Taking into account ECB President Lagarde’s interview at 25:00, we will monitor the reactions of the various European currencies.