More Employment, Less Wages for Britons
More and more people are in work in the UK, but salaries are not growing as much as they should. This is shown by data published by the Office for National Statistics (ONS). Wage growth, including bonuses, was less than expected in July, spreading disappointment and making the Pound suffer. Muted wage growth and rising inflation are making it more difficult for citizens to cover their household needs. However, the UK’s 4.3% unemployment rate in the three months to July, not seen before since 1975, is something to cheer about.
Jean-Claude Juncker, the European Commission’s (EC) president, delivered a speech in the European Parliament (EP) about the future of the European Union (EU) and didn’t neglect to talk about Brexit. Juncker said that Britain will regret leaving the EU and that Brexit is “a sad and tragic moment in our history.” The EC’s president, however, said that the will of the British people will be respected.
Pound Sterling – UK Markets
Today, the Pound lost ground against the US Dollar, after hitting a fresh 2017 high early in the morning, with the exchange rate set at $1.32. Sterling dipped against the Euro with the exchange rate set at €1.10. The reason for Sterling’s drop was data released by the ONS regarding average weekly earnings.
The ONS survey showed that weekly average earnings growth in the UK in July, including bonuses, came in below market’s expectations at 2.1% instead of 2.3%. Excluding bonuses, the weekly average earnings growth in the second month of the summer came in at 2.1%, in line with expectations. With UK inflation jumping to 2.9% in August, this means that real wages are still getting lesser, hurting citizens’ purchasing power.
Things were much better in the unemployment front as the rate fell to 4.3% in the three months to July. The unemployment rate has never been in such low level since the second quarter of 1975. The employment rate reached 75.3%, which is the highest reading since 1971. 32 million people are working, almost 380,000 more than in the same period in 2016. The number of people claiming unemployment benefits in August dropped by 2,800 instead of increasing by 600 as analysts were expecting.
US Dollar – US Markets
The US Dollar continued dropping against the Euro with the exchange rate set at €0.83. The US Dollar Index (DXY) also fell to 91.80. Later in the day, the August’s producer price index data is going to be released by the Bureau of Labour Statistics with analysts expecting that the index will rise, after recording a fall in July.
Treasury Secretary Steven Mnuchin said to CNBC that the administration is considering backdating the promised tax changes to 1st January this year, something that in his opinion would be beneficial for the US economy. Mnuchin downplayed the possibility of the corporate tax being cut down to 15% as Donald Trump has vowed to do. “I don’t know if we will be able to achieve that given the budget issues, but we are going to get this down to a very competitive level,” said Mnuchin while market experts expect the corporate tax to be reduced from 35% to 25%.
Apple stock fell by 0.4% at $160.82, following the end of the new iPhone model presentation. Investors were disappointed to hear that the top iPhone-X model will not be available for orders until October. Industry experts now expect that Apple won’t be able to post sales of $86.8bn in the quarter ending in December, as the first iPhone-X units will be delivered to their owners in November. Some analysts explained that Apple failed in terms of getting that phone out in line with market expectations, while 10% of devices are now scheduled to be sold in spring instead of winter.
Euro – European Markets
The Euro edged up against the US Dollar with the exchange rate set at $1.19. The president of the European Commission Jean-Claude Juncker made his annual speech in the European Parliament in which he stressed the need for further integration and noted Europe’s improved economic outlook.
Juncker said that there should be a Eurozone finance minister, who would serve as a vice president of the European Commission and as a president of the Eurogroup. The Luxembourgish politician called for the creation of an agency which would enforce employment rules across the bloc. He also said that a new industrial strategy is being planned to ensure that companies based in the European Union remain competitive. Juncker urged the EU officials to start trade talks with Australia and New Zealand and to conclude them by 2019.
According to Eurostat’s data, the Eurozone’s industrial production grew by 3.2% in July, on an annualised basis, missing analysts’ expectations for a 3.4% expansion. On a monthly basis, industrial production in the Euro bloc increased by 0.1%, in line with expectations, after having recorded a drop in June. In Spain, inflation in August came in at 1.6% as it was anticipated. In Germany, August’s inflation figure came in at 1.8%, on a year-to-year basis.
Other Currencies – Highlights
Sterling dipped against the Australian Dollar, trading at 1.65 AUD. Despite the fact that the Westpac Melbourne Institute Index of Consumer Sentiment rose by 2.5% in September, when compared with August, the consumer mood remains downbeat. According to Westpac’s report, the mood remains downbeat with September being the tenth consecutive month that pessimists have outnumbered optimists. Family finances are a key area of concern for Australian citizens who see their spending capabilities getting squeezed.
The Pound fell against the New Zealand Dollar, trading at 1.82 NZD. Standard and Poor’s analysts said in a report that New Zealand’s housing market needs to cool down further and credit growth should slow down in order to remove risks to the wider banking system. They suggest that risks from credit growth and house price inflation have stabilised this year, but they also note that the trend should continue before they could say that the dangers for the banks have been avoided.
Sterling edged lower against the Swiss Franc, trading at 1.27 CHF. A Reuters poll among economists revealed their belief that the Swiss National Bank (SNB) will keep the LIBOR target range unchanged until, at least, the first quarter of 2019.