UK’s Labour Market Shows Modest Improvement
George Osbourne will be in a somewhat sombre mood this morning, as unemployment rose for the second straight month. Expect opposition to the Government to go for the jugular, not least with a Corbyn leadership looking increasingly likely, if the anti-austerity candidate didnt feel the wind fully behind his sales before, expect him to now! After all, growth in average earnings including bonus was well below market forecast during the three month period.
Across the Atlantic, amid little by way of significant economic releases, investors will keep a tab on JOLTS job openings and weekly mortgage applications data scheduled later in the day for direction. In Europe, an update on region’s industrial activity for June, due shortly, will attract some market attention. Any positive data, will be a desperately needed shot in the arm, as the Greek debt crisis continues to plague the European dream.
Pound Sterling – UK Markets
Red Bull sales Will no doubt see a spike today, as a surge of economic data, overwhelms traders and economists alike. The Pound is trading in a narrow range against the US Dollar this morning, and those currency traders will be digesting the just released employment and wages data in the UK for further signs of tightening in the nation’s labour market. The latest influx of labour market data revealed that average weekly earnings growth slowed more than market consensus for three months until June on lower bonus pay, however core wage earnings stayed in line with estimates. In addition, the three month average ILO unemployment rate remained steady at 5.6% for June, after rising unexpectedly in the March – May period. The UK central bank, in its latest inflation report estimated that wage earnings growth will pick up and that the scope for further sharp falls in unemployment was limited (I think that entitles George to at least one sigh of relief!). With the economy growing strongly in the second quarter, the modest improvement in employment figures today will likely be scrutinised by the BoE to decide on the time to raise interest rate.
Yesterday, Sterling traded on a weaker footing against the Euro as there was little economic data in the UK to spur gains in the Pound. Weak Industrial data from the Eurozone though could see the pound regain some of that fighting spirit we saw earlier in the year!
US Dollar – US Markets
The on going discussion within the Fed regarding interest rates, looks set to continue with the greenback trading broadly lower against its major currency counterparts this morning. With little data on tap in the US today, trading in the US Dollar will largely be influenced by global macroeconomic developments. The US government’s estimate of job openings and Mortgage Bankers Association's weekly update of mortgage application activity in the US, scheduled later in the day, might attract some market interest. Even though markets anticipate job openings for June to pull back slightly after two consecutive months of record highs, the upbeat trend in the employment vacancy data is likely to hint at an ongoing expansion in the labour market. The latest mortgage applications for new home purchases would shed light on the strength of the US housing market.
Markets, much like Donald Trump’s presidential campaign, are focused on China following the unexpected move by the People’s Bank of China to devalue its currency. On the macro front, preliminary figures yesterday indicated that unit labour costs rose more than estimates in the second quarter, while non-farm productivity missed forecasts,
Euro – European Markets
The shared currency has extended its gains and is trading on a firmer footing against its key peers this morning, encouraged by recent optimism surrounding Greece ahead of the nation’s parliament vote due tomorrow to approve the critical €85 billion rescue package. The Euro appears to have shrugged off the second round of Chinese central bank’s yuan devaluation today, should a third occur, we can surely at least consider using that evocative yet so often discouraged term- currency war!
Investors will now shift their attention towards Euro zone’s industrial production data which is scheduled for release in a short while. Today’s June update on industrial activity is expected to show a mild improvement from the previous month’s reading. Separately, data released earlier in the day showed that Italian trade surplus narrowed sharply for June, though it had limited impact on trading in the Euro. Tomorrow, final inflation figures from Euro zone’s largest economy and CPI data from Spain and France will attract some market attention.
Other Currencies – Highlights
So what of Abenomics I hear you ask? Economic data released earlier in the day showed that activity in Japan’s tertiary industry rebounded for June after falling in the previous three months, lifted by expansion across different industrial sectors including information and communications, finance and insurance, health care, scientific research, real estate, and compound services. Additionally, industrial production in Japan rose more than initially estimated for June. The better than expected Japanese industrial and tertiary activity data buoyed the Japanese Yen. The Japanese Yen is currently trading firmer against the US Dollar.
Meanwhile, minutes from BoJ’s last monetary policy meeting revealed that at least two policymakers were cautious about the inflation outlook as they suggested that inflation expectations have weakened in the nation. The minutes also cast doubts about Japan’s exports, citing concerns related to the slowdown in China. However, the BoJ minutes received limited attention, as market focus was on the People's Bank of China’s latest measures to devalue the yuan.
So there it is, well...at least for the morning! Have a great day!