Category: Daily Look

UK Unemployment Rate crosses the 7.0% Threshold



It’s a good thing Bank of England Mark Carney has changed his forward guidance to look at spare capacity as opposed to just unemployment as today should see the rate edge 0.1% lower to 7.1%, a stone’s throw from his original threshold of 7.0% that would have triggered the first interest rate hike in the UK.  Despite his arch dovishness and yesterday’s fall in inflation for the UK, sterling was very quick to reverse initial weakness and GBPUSD rallied back above the 1.6700 level, this morning it trades at 1.6745.  Only last week cable hit a fresh four year high, putting 1.7000 in sight and with the near term trend continuing to maintain an upward bias, bulls of sterling will be closely watching for a test of resistance seen at the recent highs around 1.6820.

Despite the headline figure being key and also the claimant count number likely to drive sterling’s moves today, commentators will be focusing more on the potentially headline grabbing average earnings figure.  This is due to come in at 1.7%, higher than yesterday’s 1.6% CPI number and the first sign than real incomes are increasing.  For those serious inflation bears out there, this could prevent any continued steep decline in inflation as the already consumer lead recovery in the UK picks up steam.

Chinese data overnight has assisted a return of risk appetite this morning as both retail sales and the headline GDP figure exceeded expectations.  The Yen has ceded some ground and indices are heading higher as it looks like investors are looking ahead to the Easter break with optimism.

Further reading:

UK unemployment falls to 6.9% – GBP/USD soars above 1.68

NZD/USD falls to low support on inflation miss

Sterling likes the CPI release

Sterling likes the CPI release

We’re already seeing sterling coming under pressure this morning ahead of today’s CPI figure which is due to come in at 1.6% Year-on-Year, a decline from last month’s 1.7% and in line with the Bank of England’s forecast.  We should see the Month-on-Month number decline from 0.5% to 0.2% with transportation prices likely to be

The euro softened following Draghi’s talk

The euro softened following Draghi’s talk

Unsurprisingly Mario Draghi tried to talk down the euro over the week end when he was meeting with the IMF and World Bank giving yet further indication that he will act as and when required either if inflation remains low for too long or if the euro continues to appreciate.  The reaction from the single

Covering of dollar shorts could be seen towards the weekend

Covering of dollar shorts could be seen towards the weekend

This will be seen as the week that the dollar bulls were put back into their box. The dollar index is now 1% below the average seen so far this year and remember that this was the year when most were looking for the dollar to appreciate on the back of Fed tapering and the

Back to the start line

Back to the start line

The dollar has now completed a full reversal of the gains seen mid-March to early April, with the market’s interpretation of messages from the US Federal Reserve accounting for most of the climb higher and subsequent reversal. Recall that it was Yellen’s comments in the wake of the March meeting that caused the initial move

FOMC Meeting Minutes On Tap – Focus Shifts to Interest Rate Time-line:

FOMC Meeting Minutes On Tap – Focus Shifts to Interest Rate Time-line:

Equity markets staged a moderate rebound yesterday, managing to claw back some of the wash-out seen over the past few days, despite the USDJPY carry trade continuing to collapse with the pair sliding below the 102 handle. Employment data out of the US which showed job openings stood at 4.2M as of the last day in February helped underpin

Markets await the Fed minutes

Markets await the Fed minutes

The divisions that we highlighted yesterday have continued overnight, with emerging market currencies pushing ahead, with the Aussie also firmer and making new highs for the year. This at a time when equities have stalled in the wake of the US jobs market report last week. We have also seen some marginal reversal in the

BOJ waiting game

BOJ waiting game

In terms of currencies that have defied expectations so far this year, the yen is probably second to the Australian dollar. The start of the year was characterised by expectations of further yen weakness to come on the back of the stimulus measures, both monetary and fiscal, being enacted by the authorities to get the

Risk appetite returns

Risk appetite returns

What the Eurozone does about an inflation rate of 0.5% was not resolved last week after the ECB meeting, but we are likely to see the debate continue into this week, which is likely to keep the single currency on its toes. The head of the ECB, Mario Draghi, heads over to Washington for the

All Eyes on the Non-farm Payroll Report

All Eyes on the Non-farm Payroll Report

There was little in the way of change from the ECB yesterday, certainly from the action side of things, but also in their expectation that inflation will return to the 2% target by the end of 2016.  What we did get from Mario Draghi however was a more assertive stance towards undertaking quantitative easing should