UK Jobless Rate Falls but Wage Growth Eases
The Pound has trimmed part of its early morning gains against the US Dollar after the just out latest employment figures from Britain indicated that wage growth was below market estimates for the three months through September, but the jobless rate sunk to its lowest level since early 2008. This mixed data is unlikely to induce the BoE to change its view regarding raising its record low interest rates in the near term.
Later in the day, ECB President Mario Draghi’s comments at the BoE’s Open Forum could draw some market interest particularly since it comes less than a month before the December policy meeting, when the central bank is expected to introduce further stimulus measures.
Pound Sterling – UK Markets
The Pound has erased some of its gains against the US Dollar and the Euro this morning after the latest UK employment report revealed that pay growth including the effects of bonus missed expectations of a modest rise and average earnings excluding bonus declined well below market estimates for the three months through September annually. Additionally, the number of unemployed workers claiming for jobless benefits rose for October. However, in some positive news, the nation’s unemployment rate unexpectedly fell to its lowest level since early 2008. In the previous week, the BoE had cautioned that employment growth will slow and it sees a modest further fall in unemployment. The soft print in wage growth, however, has added pressure to the Pound this morning. In a short while, comments by the BoE Governor Mark Carney at the open forum today will be closely scrutinised for any cues or clarifications regarding the central bank’s key interest rates.
Moving ahead, the remainder of the week again looks quiet with the exception of a monthly survey data based on housing costs in the UK scheduled for release tomorrow.
US Dollar – US Markets
The US Dollar has surrendered part of its previous session gains and is trading broadly lower against the Euro and the Japanese Yen this morning. Amid a light economic calendar day in the US and Europe today, trading direction in the Euro – US Dollar currency pair will hinge on risk appetite trends and in particular by the tone of the speech by the ECB President Mario Draghi later today. On the other hand, the greenback has edged higher against the Pound this morning, following the release of the dismal UK employment report.
In the session ahead, the only US economic data waiting to be published is the weekly report on demand for mortgage applications. Recent chatter about a Federal Reserve interest rate rise in December reflects confidence that economic growth will continue in the coming months and perhaps even accelerate. But for industries such as the housing market, higher interest rate increases the cost of borrowing and as such cautions a turbulent period for the sector in the months ahead. As a result, today’s update for mortgage filings will be eyed to gauge the growth outlook of the US residential sector.
Euro – European Markets
In a slow day for economic releases in Europe today, Euro investors will look forward to global economic and political news in the session ahead for direction in trading in the shared currency against its key peers. Meanwhile, possibility of a further extension of European Central Bank’s (ECB) massive asset purchase programme in its December monetary policy meeting continues to weigh on market sentiment. Later in the day, a speech by the ECB Chief Mario Draghi at the Bank of England’s Open Forum will take center stage and his remarks will be widely monitored for any more hints of further easing at next month’s policy meeting. On the macro front, data released earlier in the day indicated that German whole sale prices fell in negative territory for the third straight month in October, indicating lack of price pressures in the Euro zone’s largest economy. This will be confirmed in tomorrow’s German October inflation print.
Going forward, spotlight will gradually turn towards Euro zone’s advance growth figures for the third quarter scheduled in the final session of the week.
Other Currencies – Highlights
The New Zealand Dollar is currently trading on a stronger footing against the greenback. The Kiwi Dollar remains supported against the US Dollar after the Reserve Bank of New Zealand (RBNZ) earlier eased fears of a potential rate cut in the near term. In its biannual Financial Stability Report, the RBNZ stated that there was less scope for further monetary policy easing to offset a sharp rise in funding spreads. Meanwhile, the report also noted an increase in financial stability risks, particularly in New Zealand’s housing and dairy sectors. Home price inflation for properties in the Auckland area have jumped and New Zealand’s dairy industry has been hurt by weakness in demand from its main exporter China and a drop in commodity prices. The RBNZ Governor, who spoke after the release of the report, refrained to comment on the central bank’s monetary policy altogether.
Later today, a study on the business conditions in New Zealand and food prices data could draw some market interest.