Pound Sterling Rebounds on Strong Labour Report
The Pound enjoyed a reprieve against some of the majors yesterday morning, rallying in response to a broadly better-than-anticipated UK labour market report.
Traders were cheered by a surprise fall in unemployment, from 4.5% to a new 42-year low of 4.4%, while an uptick in price pressures also benefitted the UK currency.
It seems that the trend of multi-decade high jobs growth and rising price pressures has helped British workers bargain for slightly higher wages, with average earnings accelerated unexpectedly from 1.8% to 2.1%. Although the 2.6% rate of inflation means that real wage growth remains in negative territory, at -0.5%, the figures were seen as a step in the right direction and this bolstered the appeal of the Pound.
If the British workforce continue to see wage hikes over the next few months, then it could persuade policymakers at the Bank of England to seriously debate raising rates in the New Year. However, it must be noted that this is not the most likely scenario; it is expected that wages will be outpaced by inflation for the foreseeable future.
Pound to Euro Exchange Rate Rebounds From 10-Month Low
The Pound to Euro exchange rate bounced back from a 10-month low yesterday morning in reaction to data showing that British joblessness tumbled to its lowest level since 1975 in June.
GBP/EUR rallied by around a third of a cent following the UK labour market figures, while demand for the single currency was dealt a minor blow by rumours that European Central Bank President Mario Draghi had no intention of discussing monetary policy during his time at the Jackson Hole gathering of banker’s in the US later this month.
The news was seen to suggest that the ECB was in no hurry to start tapering its expansive quantitative easing scheme.
Data in the Eurozone confirmed earlier estimates that the currency bloc grew by 0.6% on a quarterly basis in Q2. On an annual basis the figure was upgraded from 2.1% to 2.2% but it had little impact on demand for the Euro.
Pound to US Dollar Exchange Rate Rebounds From New 1-Month Low
‘Cable’ increased in demand immediately following the upbeat British unemployment report yesterday, however, Sterling had previously struck a fresh one-month low versus the US Dollar.
The Pound pushed ahead further during the evening following the latest minutes report from the Federal Reserve, which showed a split between policymakers.
The hawks ‘worried about risks arising from a labour market that had already reached full employment’, while the doves said the bank ‘could afford to be patient under current circumstances’, and ‘argued against additional adjustments’ until officials could be sure that inflation was back on track.
Markets sided with the doves and drove the ‘Greenback’ lower following the statement.
Pound to Canadian Dollar Exchange Down as Oil Prices Rise
The Pound to Canadian Dollar exchange rate lost ground by around -60 pips yesterday despite the morning’s sanguine jobs report.
It seems that demand for the commodity-correlated ‘Loonie’ was boosted by a rise in crude oil prices, which drifted higher as US crude stocks fell by around 9 million barrels last week, which beat forecasts of a smaller 3.3 million barrel drawdown.
Pound to Australian Dollar Exchange Rate Slides -150 Pips
Sterling skidded to its lowest level in almost a month against the Australian Dollar yesterday, plummeting by around -150 pips despite upbeat domestic data.
The big report to look out for in terms of Sterling sentiment today is July’s UK retail sales figure, which is tipped to print at 1.2%, significantly lower than June’s score of 3.0%. Because consumer spending is a key component of British gross domestic product, a downbeat retail sales report could easily put further pressure on the Pound.
Pound to New Zealand Dollar Exchange Rate Down a Cent as Risk Sentiment Improves
The New Zealand Dollar followed its Antipodean counterpart, the ‘Aussie’ Dollar, higher versus the Pound yesterday. Demand for risk-correlated assets appeared to improve on a softening of tensions in the Korean Peninsula.
North Korea recently decided to put plans to launch missiles near the US Pacific territory of Guam on hold. In response President Donald Trump praised the ‘wise and well reasoned decision’ of Kim Jong Un, and his conciliatory tone was well received on financial markets.
Data Released Today
09:30 GBP Retail Sales (YoY) (JUL)
10:00 EUR Euro-Zone Consumer Price Index (YoY) (JUL F)
12:30 EUR ECB account of the monetary policy meeting
14:15 USD Industrial Production (JUL)