What’s been happening?

Pound Sterling – UK Markets 

The employment report released by the UK’s Office for National Statistics on Tuesday revealed that the unemployment rate remained steady at 4% in three months to July while the wage inflation rose slightly in the same period. “Latest estimates show that average weekly earnings for employees in Great Britain in nominal terms (that is, not adjusted for price inflation) increased by 2.9% excluding bonuses, and by 2.6% including bonuses, compared with a year earlier,” the ONS said. Further details of the publication showed that the claimant count rate rose to 2.6% in August from 2.5% in July. Although the pound sterling started to gather strength against its peers on the back of these data, it lost its momentum later in the day on latest Brexit headlines.

Citing EU sources involved directly in Brexit talks, the Evening Standard claimed that officials in Brussels were complaining about the misleading reports pointing to a major shift in the EU’s Brexit strategy. “There is no change on substance. The Brits are probably hoping we will change our red lines. This will not happen,” sources said according to the news outlet. 

In other Brexit related news, Britain's finance minister Philip Hammond stated that an orderly Brexit deal was doable in six to eight weeks and added: “Political declaration about the future relationship between the UK and the EU needs enough detail for parliament to be able to take a view.” The chancellor also announced that Mark Carney has agreed to extend his term as the governor of the Bank of England until the end of January 2020. 

US Dollar – US Markets

The National Federation of Independent Business’ (NFIB) Optimism Index jumped to a record high of 108.8 in August from 107.9 in July and beat the market consensus of 108.2. “The Index is dominated by real business activity that makes GDP grow: job creation plans, job openings, strong capital spending plans, record inventory investment plans, and earnings. Small business is clearly helping to drive that four percent growth in the domestic economy,” NFIB Chief Economist Bill Dunkelberg said in the press release. 

Other data from the United States showed that the number of job openings rose to an all-time high of 6.9 million in July from 6.8 million in June and wholesale inventories rose by 0.6% in the same period compared to analysts’ estimate of 0.7%. Despite the upbeat data, the US Dollar Index struggled to gain traction as investors stay on the sidelines while waiting for the U.S. to place new tariffs on $200 billion worth of Chinese goods.        

Euro – European Markets

In Germany, the headline Economic Sentiment Index of the ZEW’s Survey improved to -10.6 in September from -13.7 in August and surpassed the analysts’ estimate of -14 while the Current Situation Index rose to 76 from 72.6. Regarding the euro area, “the financial market experts’ sentiment concerning the economic development of the Eurozone has also improved, with the corresponding indicator climbing 3.9 points to a level of minus 7.2 points,” the ZEW said in its report and laid out the details: “Meanwhile, the indicator for the current economic situation in the Eurozone has increased slightly, rising by 1.7 points to a reading of 31.7 points.”

As expected, the Eurostat announced that employment increased by 0.4% in both the euro area and the EU28 on a quarterly basis in the second quarter of the year. According to the publication, 238.9 million men and women were employed in the EU28, of which 158 million were in the euro area, marking the highest levels ever recorded in both areas. At the end of the day, the shared currency was virtually unchanged against both the pound sterling and the greenback.

What’s coming up? 

UK: In the absence of significant macroeconomic data releases from the UK, Brexit headlines will remain as the primary driver of the sterling pound’s price action. 

US: The Bureau of Labor Statistics will release the PPI report on Wednesday. Furthermore, FOMC members Brainard and Bullard will be delivering speeches. 

EU: The eurozone industrial production will be the only data featured in the European economic docket on Wednesday.