UK Claimant Count and Jobless Rate Declines
This morning, Sterling remains suppressed across the board as the fallout of the Bank of England (BoE) Governor, Mark Carney’s speech has continued to have a prolonged downward impact on the UK currency. Also, the just out mixed Britain’s labour market print has further pressured the Pound against the major currencies. Although the numbers of the UK claimant count continued to fall in December and the jobless rate ticked lower, wage growth has slowed in November, thus failing to provide the much needed respite to Sterling traders.
Across the Atlantic, the latest consumer price inflation report is scheduled for release later in the day, with headline prices expected to again remain flat for December. However, the core inflation numbers are projected to rise on an annual basis.
Pound Sterling – UK Markets
Yesterday, Sterling dropped below the 1.42 mark against the US Dollar, its lowest level since early 2009 after the Bank of England (BoE) Governor, Mark Carney, dampened expectations of an imminent increase in interest rates. Delivering an annual lecture at Queen Mary University, the BoE Chief ruled out an early rise in the interest rate, citing that the UK economy was not strong enough and pointed to a recent turmoil in the global financial markets. He also highlighted the economic risks of an exit from Europe which could likely delay a rate decision. The remarks followed data which showed a marginal rise in core consumer prices for December, signaling weak price pressures in the nation’s economy.
Looking at the just released UK labour market data, the figures indicated that the jobless rate ticked lower for the 3 months to November and employment grew more than expected. However, pay growth softened as wages including bonuses rose less than estimates. Excluding the effect of bonuses, wages rose a touch above forecasts but still down from the 3 months leading to October.
US Dollar – US Markets
The US Dollar is trading mixed against most of the major currencies this morning, with major focus on today’s US consumer price inflation (CPI) data which has a key influence on the US Federal Reserve’s interest rate decision. Expectations are for another month of flat reading for the headline CPI data, which could still be enough to lift the annual pace above its current rate, if only slightly. On the contrary, the core inflation numbers is anticipated to increase at its fastest pace since July 2012. The core CPI will likely offer more support to views that disinflation momentum is not accelerating.
Additionally, more numbers from the US housing market in the form of building permits and housing starts will provide further evidence about the health of the nation’s residential market. Today’s housing starts update is anticipated to show a moderate rise for December, while new permits for construction projects is estimated to decline. This follows yesterday’s numbers on the mood in the home building industry, wherein the NAHB housing market index for January held close to a 10-year high, signaling modest recovery in the US housing market.
Euro – European Markets
This morning, the Euro – US Dollar currency pair is in a recovery mode, trading above the 1.09 mark. The shared currency paced gains against the greenback, amid broad based weakness in the latter after the International Monetary Fund lowered its global growth forecasts for the third time in less than a year. Today, the European docket appears empty in terms of significant macroeconomic updates. Among second-tier releases, earlier today, markets saw the release of German producer prices, which slipped further into contractionary territory in December, highlighting the weak price pressures engulfing the wider Euro area. However, traders seemed to have shrugged off the dismal German data, as the Euro maintained its upside momentum against the US Dollar even after the release of the report.
Looking ahead, the European Central Bank (ECB) officials will meet tomorrow to provide an assessment of the struggling Euro zone economy. Although the central bank is not anticipated to make any decision to ease monetary policy this week, the tone could, however, be slightly dovish after the disappointing December ECB meeting.
Other Currencies – Highlights
The US - Canadian Dollar currency pair is trading higher today, climbing further towards a 13-year high above the 1.46 mark, as the ongoing rout in oil prices continue to weigh on the commodity related currency. Looking ahead, the focus will be on Bank of Canada’s (BoC) monetary policy meeting later today. Although, the central bank is widely expected to keep its monetary policy unchanged, markets will be eagerly looking out for hints to gauge the BoC’s future course of action, especially after the Governor, Stephen Poloz, in a speech last week, stated that the fall in the Canadian Dollar is majorly due to weaker oil prices. Following the interest rate decision, focus will shift towards consumer price inflation and retail sales data scheduled to release towards the end of the week.
The Canadian Dollar traded on a slightly weaker footing against the US Dollar yesterday following a slowdown in China’s GDP growth rate, albeit in line with market expectations, and as the International Monetary Fund cut its global growth forecast.