Hiring Pace in the UK Remains Robust
Today’s upbeat wages and jobs reports have strengthened hopes that the labour market in the UK remained buoyed for the three months ended December, despite inflation in the nation remaining weak. Against the backdrop of yesterday’s inflation survey showing an upside surprise in Britain’s core inflation measure, optimism among market participants reinforced the view that the current weakness in inflation might be short-lived.
Across the Atlantic, the minutes of the Fed’s most recent policy meeting will be scrutinised to gauge the timing of an interest rate rise in the US, especially considering that jobs growth in the nation has remained robust lately. Additionally, traders will note the US producer prices inflation print later today, which is anticipated to show a fifth consecutive ease for January amid weak gasoline prices.
Pound Sterling – UK Markets
The just out labour market report has revealed that wage earnings in the UK continued to grow at a robust pace and the number of job additions in the economy remained firm for the three months ended December. Amid no signs of softness in Britain’s jobs market growth, despite muted inflation, optimism among investors is likely to remain buoyed. Separately, the minutes of the latest BoE’s monetary policy meeting revealed that policymakers unanimously voted in favour of keeping interest rates unchanged in the UK. However, considering Mark Carney’s recent comments that the BoE is on course to raise interest rates next year, this publication offered no additional cues to traders.
The Pound gained ground against the greenback yesterday following the release of Britain’s consumer price inflation report. The print showed that the nation’s core inflation rate rose unexpectedly for January amid a robust pace of growth in the jobs market, thereby strengthening hopes that the current weakness in inflation might be short-lived. However, Sterling pared its gains against the US Dollar in the latter half of the trading session.
US Dollar – US Markets
The US Dollar is trading in a tight range against the majors this morning, ahead of the release of US Federal Reserve minutes for the recent FOMC meeting. The Fed, in its monetary policy statement, had hinted at keeping patient in raising interest rates. In light of this, investors will keenly watch the fine print of today’s release to gauge how concerned the Fed is towards slowing inflation and signs of ebbing global growth. Additionally, today’s report on producers’ price inflation is anticipated to see another decline after a drop in the previous month due to falling oil prices. As a result, the focus is likely to remain on the core consumer price inflation rate, which would give insight into price trends excluding energy prices. Furthermore, reports related to residential and construction activity in the US are also scheduled for release today.
The US Dollar declined against the Euro, while it nudged higher against the Japanese Yen in yesterday’s trading session. Last week’s trend of disappointing macro reports continued as yesterday’s Empire State manufacturing index and the NAHB Housing Market Index came in below expectations, possibly hurt by inclement weather conditions.
Euro – European Markets
The single currency rebounded from its early session lows and briefly climbed above the 1.14 mark against the US Dollar yesterday, following a jump in German investor sentiment. The German ZEW survey for February showed a marked improvement in investor morale, albeit slightly lower than market expectations. Meanwhile, the Euro zone economic sentiment index also nudged higher, consistent with recent economic releases reflecting signs of a pick-up in the region’s economic activity. Separately, the Euro’s gains against its key peers reflected optimism that despite the current logjam, Greece and its Euro zone partners would find common ground to break the deadlock.
The Euro is trading close to yesterday’s highs against the greenback this morning, with market participants hopeful that an arrangement on Greece would be reached before the end of the month. For the day ahead, traders are likely to pay close attention to the ECB’s meeting scheduled later today, wherein the central bank is expected to shed light on whether it will continue to offer emergency funding to Greek banks despite a breakdown in debt talks.
Other Currencies – Highlights
Earlier today, the Bank of Japan (BoJ) in its monetary policy statement announced that it will keep its monetary stimulus programme in place as widely expected. The Japanese Yen has edged higher against the greenback after the BoJ released its policy statement. The statement also expressed optimism about Japan’s economic situation. The central bank’s view is in line with the preliminary growth data for the fourth quarter, which indicated that the world’s third largest economy is gradually coming out of recession. Additionally, while industrial production data released recently recorded a reading lower than the preliminary estimate, growth for December moved into the positive zone from a decline in the previous release.
Yesterday, the US Dollar closed higher against the Japanese Yen. Going forward, investors will keep a tab on the Japanese merchandise trade balance data scheduled later today for further direction.