The Pound has fallen today after higher than expected unemployment figures lowered expectation that the Bank of England (BoE) will raise interest rates in May. Britain’s unemployment rate rose for the first time in nearly two years, up from 4.3% to 4.4%. A record-high number of vacancies indicate that UK firms are struggling to find qualified workers. Later today, BoE governor Mark Carney may clarify the bank’s reaction to this data when he speaks with MPs about the latest quarterly inflation report.

The US Dollar continues mounting a recovery from its three-month losing streak as investors await today’s Federal Open Market Committee (FOMC) Minutes. The Euro is steady in spite of dismal Purchasing Managers Induces (PMIs) from the Eurozone that show weaker than expected growth in both the manufacturing and services sectors. The German PMI slipped to a three-month low and France’s fell to a four-month low in February, after January’s record high.

Pound Sterling – UK Markets

The Pound has slipped against the US Dollar, with the exchange rate at $1.39. Sterling is also trading lower against the Euro, exchanging at €1.13.

Today’s higher unemployment data have weakened the Pound since they decrease the likelihood that the Bank of England will raise interest rates in May. Basic pay rose by more than expected, up to 2.5%, according to the release by the Office for National Statistics, however it still lags behind inflation. At 3% inflation, real wage growth is still squeezed by 0.5% annually.

January’s unemployment rate climbed to 4.4% in the three months to December. The claimant count rose by 46,000 to 1.47million, according to the International Labour Organisation (ILO). The number of people in work during the quarter also rose by 88,000, bringing the number of people employed in the UK up to 32.147million. The number of vacancies in the last quarter spiked from 24,000 up to a record-high of 823,000, indicating employers are challenged to fill these roles.

UK factory growth hit a four-month low, according to yesterday’s Confederation of British Industry (CBI) industrial trends survey. The balance of export orders fell sharply from +19 to +10 which indicates a decline in demand for UK goods overseas. Business caution over investment due to Brexit uncertainties and lower consumer spending are also a domestic challenge for manufacturers. The CBI said that 30% of manufacturers reported total order books were above normal in the last quarter, while 20% reported they were below normal.

The Bank of England’s (BoE) Inflation Report parliamentary hearing this afternoon might give the Pound some support, if they indicate their intentions aren’t altered by today’s data. The BoE’s previous stance was that policymakers are prepared to raise interest rates sooner than had previously been expected. Today’s responses to the Treasury committee’s questions for BoE governor Mark Carney and monetary policy Committee members Ben Broadbent, Andy Haldane and Silvana Tenreyro may provide further clarity on the timing of the first of the rate hikes.

US Dollar – US Markets

The Euro has lost ground to the US Dollar, exchanging at $1.23. The US Dollar Index (DXY), which measures the strength of the Dollar against six major competitor currencies, is up, at 89.82.

The US Dollar continues to gain in value although analysts at Morgan Stanley predict that US growth will “soften” from April until June. They believe the recent stock market volatility was an “Appetiser, not the main course,” for upcoming stock market falls that will be triggered by rising inflation and the economic slowdown they see coming in the near future before the US tightens its monetary policy.

Yesterday’s Bill Auction releases show that the average yields on bills auctioned by the US Treasury Department indicate investors remain confident in the government debt situation. Yields are steadily rising, especially on the 2-Year Note Auction. It rose to a nine-year high after the debt auction, as the Treasury Department sold $28billion of the 2-year notes, yesterday.

January’s Federal Open Market Committee (FOMC) Minutes will be scrutinised today for signals as to when the US intends to begin raising interest rates. Today’s speech by FOMC member Patrick Harker is expected to suggest that inflation is still below target for raising interest rates, as he has said recently.

Euro – European Markets

The Euro has advanced against the Pound, with the exchange rate set at £0.88.

The Eurozone’s private sector growth has slowed since January, which had the strongest expansion seen in 12 years. According to today’s IHS Markit Manufacturing Purchasing Managers Index (PMI) release, the Eurozone Composite PMI was down from 58.8 in January, to 57.5 in February. Markit commented that service sector growth is still having its best growth in seven years, while manufacturing is at one of its strongest levels in the 20-year history of the survey.

Germany’s IHS Markit Manufacturing PMIs show slowing growth that was weaker than expected for February. Services slipped the furthest, coming in at 55.3 after January’s figure of 57.3. Manufacturing growth was marked at 60.3, slower than the forecast reading of 60.6, and down from January’s robust figure of 61.1. France’s PMIs also show that output continues to expand at a slower rate than had been seen in January.

Eurozone Consumer Confidence slipped to a reading of 1.0 for February, declining from January’s figure of 1.3. This reflects the decreased German optimism seen in the ZEW Current Situation survey which dropped to 92.3 from 95.2. February’s Eurozone ZEW Economic Sentiment survey came in slightly higher than the forecast reading of 28.4, but, at 29.3, the reading was lower than January’s figure of 31.8.

Other Currencies – Highlights

Sterling is steady against the Australian Dollar, with the exchange rate at 1.77 AUD. Australia’s wage prices beat estimates it would remain steady at 0.5% for the fourth quarter of last year, coming in at 0.6%. Construction Work Done dropped to -19.4%, lower than the forecast decline of 10%.

The Pound is trading weaker against the New Zealand Dollar, exchanging lower at 1.89 NZD. New Zealand’s Global Dairy Trade Price Index showed that prices fell for the first time this year after 3 consecutive increases. Prices dropped by 0.5%, missing the forecast of rising by 5.9%.

Sterling is trading lower against the Japanese Yen, exchanging at 149.95 ¥. Today, Japan’s Nikkei Manufacturing Purchasing Managers Index came in at 54.0, which was lower than the expected increase to 55.2 for February and January’s reading of 54.8.