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Real earnings edge closer to positive territory

Real earnings edge closer to positive territory

The headline UK unemployment rate declined to reach 4.3% again (joint lowest rate in 43 years) due to a larger-than-expected employment gain. UK unemployment claims increased by 9,200 in February compared with forecasts of a modest decline. Average earnings warranted most attention with the headline annual increase accelerating to 2.8% from a revised 2.7% previously and above consensus expectations of 2.6%. This was the highest reading since September 2015 and, importantly, real earnings moved close to positive territory given the inflation decline, increasing the potential for a tighter monetary policy.

Stronger-than-expected government borrowing data also underpinned sentiment and the Euro retreated to seven-week lows near 1.1461 as UK yields increased. The latest CBI survey orders declined which dampened sentiment, although futures markets indicated that the chances of a May increase had increased to near 90%. EU Council President Donald Tusk confirmed that a UK Brexit transition deal would be agreed on Friday, although there were warnings that nothing is agreed yet on Brexit. Sterling retreated slightly against the Euro, but held firm around 1.4150 against the fragile Dollar.


The Greenback, in terms of the US Dollar Index, lost further ground yesterday and is now challenging four-week lows in the 89.40 region.

The index has accelerated lower after the Federal Reserve (Fed) delivered a ‘dovish hike’ at its meeting yesterday, surprising those who were expecting a somewhat more aggressive tone from Chief Powell.

The Federal Open Market Committee (FOMC) raised rates by 25 bp yesterday, in line with the broad consensus. However, the Committee stuck to its previous forecast of three rate hikes this year, although it raised its projection for interest rates to 2.9% in 2019 and 3.4% in 2020.

Members of the Committee also expressed some doubts over inflation as they left unchanged their view on this year’s Core PCE at 1.9% and revised next year’s Core CPI higher to 2.1%. Furthermore, the Committee now sees the economy expanding 2.7% in 2018, more than initially forecasted.

Data-wise today in the US calendar, the usual weekly report on the labour market is due, seconded by advanced PMIs measured by Markit.


The Eurozone macroeconomic calendar was relatively empty yesterday, and while Euro bulls attempted to drive the currency higher, the single currency faltered against the Dollar around the 1.2300 mark ahead of the Fed’s decision.

The Eurozone manufacturing and services sector suggests activity has peaked at the back-end of 2017 and is decelerating going into the spring of 2018. That said, by historical standards, the sector remains high.

German IFO index of business confidence is set for a drop in March today. Should the index follow suit of the ZEW, business confidence will show a sudden fall. Further, Trump’s trade wars will threaten German export-oriented prosperity.

Data to Watch:

00:30 AUD Employment Change s.a. (Feb)
00:30 AUD Unemployment Rate s.a. (Feb)
08:30 EUR Markit PMI Composite (Mar)
08:30 EUR Markit Services PMI (Mar)
08:30 EUR Markit Manufacturing PMI (Mar)
08:30 EUR ECB’s Lautenschläger Speech
09:00 EUR IFO – Expectations (Mar)
09:00 EUR IFO – Current Assessment (Mar)
09:00 EUR IFO – Business Climate (Mar)
09:00 EUR Economic Bulletin
09:00 EUR Markit Services PMI (Mar)
09:00 EUR Markit Manufacturing PMI (Mar)
09:00 EUR Markit PMI Composite (Mar)
09:30 GBP Retail Sales (MoM) (Feb)
09:30 GBP Retail Sales (YoY) (Feb)
09:30 GBP Retail Sales ex-Fuel (MoM) (Feb)
09:30 GBP Retail Sales ex-Fuel (YoY) (Feb)
12:00 GBP BoE Asset Purchase Facility
12:00 GBP BoE Interest Rate Decision
12:00 GBP Monetary Policy Summary
12:00 GBP BOE MPC Vote Cut
12:00 GBP BOE MPC Vote Unchanged
12:00 GBP BOE MPC Vote Hike
12:00 GBP Bank of England Minutes
12:30 USD Initial Jobless Claims (Mar 16)
13:00 USD Housing Price Index (MoM) (Jan)
13:45 USD Markit PMI Composite (Mar)
17:00 GBP BOE Ramsden Speech

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