Sterling
The Pound registered mild gains versus the majors yesterday in reaction to a surprise dip in the British jobless rate.
UK unemployment fell to a 42-year low of 4.6% in March thanks to an ‘astonishing’ 122,000 surge in job creation, which took the employment rate to an all-time high of 74.8%. The headline figures gave Sterling a boost but the optimism is unlikely to last for long, given that wage growth has once again been overtaken by inflation.
In March average earnings, excluding bonuses, slowed to 2.1% – less than the 2.3% rise in March’s CPI and significantly less than April’s inflation print of 2.7%. According to the Resolution Foundation the latest dip in real wage growth means that British pay packets have now endured their worst decade since the Napoleonic Wars.
Euro
Sterling ticked higher initially against the Euro yesterday as markets responded sanguinely to the latest British labour market report.
However, by the end of the London session most of the Pound’s gains had been eroded, due to concerns that British economic output could struggle over the next 12 months if falling real wage growth starts to drag on the UK’s highly influential retail sector.
Across the Channel in the Eurozone, the currency bloc’s consumer price index printed at 1.9%, inline with market expectations. There was also a rare piece of positive news regarding Brexit: European Council President Donald Tusk said that the EU would conduct trade negotiations with Britain with unity, political solidarity and ‘fairness’ in mind. Neither event appeared to have a marked impact on demand for GBP/EUR.
US Dollar
The Pound to US Dollar exchange rate touched a nine-day high yesterday as political concerns weighed on demand for the ‘Greenback’.
Fears that US President Donald Trump’s ambitious infrastructure programme and tax reforms could be delayed, or worse still: cancelled, were exacerbated yesterday when former FBI director James Comey released a memo supposedly showing that Trump had attempted to impede the agency’s investigation into his ties with Russia.
The latest developments heaped pressure on the US Dollar, with some analysts suggesting that Trump could be impeached if it was proven that the President had fired Comey in an attempt to ‘obstruct the course of justice’ in relation to allegations of collusion with Russia during his 2016 Presidential campaign.
Canadian Dollar
Sterling moved higher by around a quarter of a cent versus the Canadian Dollar yesterday as an historic fall in headline unemployment bolstered British sentiment. However, with oil prices on the up in light of the recent decision to extend the OPEC and non-OPEC oil production cuts, and UK wages being outpaced by price pressures, there is every chance that GBP/CAD could start to slide in the medium term.
Australian Dollar
The Pound struck a weekly high against the Australian Dollar yesterday as dovish sentiments from the Reserve Bank of Australia did little to boost rate hike expectations down under. GBP/AUD managed to rally by over 150 pips at one point but those gains were cut by the end of the London session.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate traded higher initially yesterday, however, demand for GBP/NZD collapsed later in the day and Sterling actually ended up tumbling by around a cent against the high-yielding ‘Kiwi’ Dollar.
Today’s only major UK ecostat is predicted to show that retail sales volumes expanded 1.0% in April, rebounding from a 1.5% contraction in March. This could give the Pound a little bit of a boost, but a weaker print would likely weigh.
Data Released
09:30 GBP Retail Sales (YoY) (APR) Medium 2.6%
18:00 EUR ECB’s Draghi Speaks in Tel Aviv High