Sterling
The Pound traded fairly flatly yesterday as a slightly better-than-anticipated UK labour market report did little to dampen Bank of England stimulus bets.
The headline jobless rate remained at an 11-year low of 4.9% and wage growth accelerated from 2.3% to 2.4%, as expected. The upbeat elements of the data package were a surprise 8,600 drop in jobless claims and a 172,000 jump in job creation, which outpaced estimates of 153,000. Although the sanguine labour figures show that the domestic jobs market is running fairly well, the prospect of further easing from the BoE remains high and subsequently demand for the Pound remains soft.
The market response to this morning’s retail sales report could be more severe. Retail spending is key to Britain’s hopes of avoiding recession over the next 6-12 months and a decent score for July could help persuade traders that resilient consumer spending will carry the UK through this tumultuous period. On the other hand, if the first post-‘Brexit’ retail report signals that demand is already beginning to wane then Sterling could suffer further losses.
Euro
The Pound to Euro exchange rate weakened minimally yesterday. Sterling had registered a mild rally in the morning in response to the optimistic UK labour market figures, however, the single currency rebounded to mark a slender 20-pip daily gain versus the Pound.
The only element of the British labour report pertaining to the period after the historic EU referendum was the 8,600 dip in jobless claims, which, although encouraging, means that the headline jobless rate is still susceptible to a downgrade if July’s figures reflect a negative shift in hiring patterns post-‘Brexit’.
US Dollar
Sterling rose minimally against the US Dollar yesterday with traders seeing little evidence in the latest Federal Reserve minutes that the US central bank is ready to raise interest rates over the next few months.
The minutes revealed that ‘some… members anticipated that economic conditions would soon warrant taking another step in removing policy accommodation’. However, policymakers agreed that further positive data would be required to prompt another rate hike. Investors had been hoping for a clearer, more positive, message and subsequently demand for the ‘Greenback’ dipped following the central bank statement.
Canadian Dollar
The Pound to Canadian Dollar exchange rate traded in a tight range for most of yesterday’s session as sturdy UK unemployment data was met by another daily gain in the oil markets.
Crude rallied for the fourth consecutive day to reach a five-week high in reaction to news that US oil inventories declined by 2.5 million barrels last week, wrong-footing expectations of a 950,000 rise. The fall in oversupply came hot on the heels of comments from Russian and Saudi Arabian oil officials suggesting that major oil producing nations plan to curb production going forward.
Australian Dollar
Sterling gave up its daily gains against the Australian Dollar earlier this morning in response to some better-than-expected labour market data from down under.
The Australian unemployment rate tumbled unexpectedly from 5.8% to 5.7% thanks to a robust 26,200 rise in job creation. The upbeat figure helped assuage fears of further rate cuts from the Reserve Bank of Australia, and thus bolstered the appeal of the high-beta ‘Aussie’.
New Zealand Dollar
The morning’s optimistic British unemployment report – a joint 11-year low – helped Sterling register a slender 30-pip gain versus the New Zealand Dollar yesterday.
Data Released
09:30 GBP Retail Sales (YoY) (JUL) Medium 3.9%
09:30 GBP Retail Sales (MoM) (JUL) Medium 0.1% 3.9%
10:00 EUR Euro-Zone Consumer Price Index (YoY) (JUL F) Medium 0.1%