UK Real Wages Fall As Inflation Rises
Real wages are still getting squeezed in the UK, according to the latest data published by the Office for National Statistics (ONS). Despite the fact that average earnings grew more than expected, inflation is running faster than the speed of salary growth, reducing the available income of citizens in the UK. The unemployment rate remained stable at 4.3%. The government issued a statement saying that “we delivered the highest pay rise for the lowest earners in twenty years by increasing the National Leaving Wage.”
The president of the European Parliament (EP), Antonio Tajani, called the €20bn offer that Theresa May is said to have made to the European Union (EU), “peanuts.” In the US, a Reuters poll showed that a slim majority of economists believe that Jerome Powell will be the next Federal Reserve Chairman, but most of them think that President Donald Trump should not replace Janet Yellen.
Pound Sterling – UK Markets
Today, Sterling dipped against the US Dollar with the exchange rate set at $1.31. The Pound inched higher against the Euro with the exchange rate set at €1.12. The ONS released data regarding average earnings and unemployment rate.
According to the ONS report, average earnings in the UK including bonuses rose by 2.2% per year in the three months to August, slightly more than the 2.1% anticipated by City analysts. Average earnings in the same time period, excluding bonuses, picked up by 2.1%, which was 0.1% higher than expected. Despite the unexpected increases on average earnings, real wages are still shrinking since inflation hit 3% in September, which is the highest reading in the last five and a half years.
The UK’s unemployment rate remained stable at 4.3%, which is the lowest figure recorded in the last 42 years. In the three months to August, the number of unemployed people fell by 52,000 to 1.4 million people. Analysts noted that with the unemployment rate at so low levels, workers would have the chance to negotiate better salaries with their employers. However, this isn’t happening because of a range of reasons such as self-employment in the “gig economy,” poor productivity and the reductions in the public sector pay.
US Dollar – US Markets
The US Dollar strengthened against the Euro with the exchange rate set at just above the €0.85 mark. The US Dollar Index (DXY) gained a bit of ground, coming in at 93.55. Later in the day, the Department of Commerce will publish data regarding building permits and housing starts in September.
Dow Jones index broke the 23,000 barrier yesterday, when United Health raised its full-year adjusted earnings forecast, making brokers buy its shares. Johnson and Johnson also announced that quarterly profit was better than expected, with its share hitting immediately an all-time high. Dow Jones touched 23,000 for the first time in its 121-year history. Donald Trump said that the US economy is enjoying a period of expansion since he became President, not seen before in the last years.
In its semi-annual report on international exchange rates, the US Treasury urged the Chinese government to “take concrete steps to level the playing field for US firms and workers.” The Treasury declined to label China as a currency manipulator, but kept it in its Monitoring List, along with Japan, Switzerland, Germany and South Korea. The US authorities also expressed their concern for the lack of progress in reducing China’s trade surplus with the US.
Euro – European Markets
The Euro slided lower against the US Dollar with the exchange rate set at $1.17. The head of the ECB, Mario Draghi, delivered a speech at the ECB conference in Frankfurt, Germany.
The Italian banker said that with ECB’s monetary policy being accommodative, there is a window of opportunity for structural reforms in the Eurozone. Draghi noted that the Euro bloc’s central bank can’t find any convincing evidence to prove that high interest rates could lead to more reforms. Draghi stressed that the crisis showed that flexible economies are more resilient, and urged Eurozone governments to tackle vested interests, while helping those who need support.
ECB’s board member Ardo Hansson expressed the opinion that the ECB’s monetary policy should be mildly adjusted in an interview on the German Handelsblatt newspaper. “People are much more optimistic about the economic development and, in this situation, it is appropriate to think about small corrections,” said Hansson. The Estonian economist said that he would like to see the level of bond purchases, regarding the quantitative easing programme, being reduced in the next months.
Other Currencies – Highlights
Sterling gained ground against the Australian Dollar, trading at 1.67 AUD. National Australia Bank (NAB) released its Cashless Retail Sales index data, which had a rebound in spending in September. The index measures all cashless retail spending by consumers using all kinds of credit cards, Paypal and BPAY. The largest increase in spending was recorded in the volatile department store category.
The Pound edged up against the New Zealand Dollar, trading at 1.84 NZD. NZ First announced that, on Thursday afternoon, it is going to reveal with which political party it will form a coalition government and much more regarding the policies that will be followed. The results of the September parliamentary elections showed that neither the National Party nor Labour could form a government on their own, branding the leader of the third NZ First party, Winston Peters as “kingmaker.”
Sterling dropped against the Polish Zloty, trading at 4.73 PLN. FTSE Russell announced that by September 2018, Poland will no longer be ranked as an Emerging Market, but as a Developed one. The Polish economy is the first central or eastern European economy to be upgraded.