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Real wages drop again, but we still have jobs

Real wages drop again, but we still have jobs

UK claimant count printed close to consensus forecasts, up 1,700 in September, while unemployment held at 42-year lows of 4.3%. Average earnings were marginally above expectations with a 2.2% increase in the three months to August, unchanged from the previous month. There was evidence of slight upward pressure on earnings growth, although with real earnings still declining, the data-inspired Sterling rally faded quickly.

The European Council will discuss the progress of the Brexit talks at a summit later today to see if they can move onto phase two of the negotiations. EU President Tusk stated that he would advise the EU, at least internally, to prepare for phase two. However, they first need to assess the progress of phase one (currently stalled on divorce payments and the Northern Irish border).

Today’s focus remains on UK Retail Sales, which are expected to drop to 0.1% (MoM) in September, while (YoY) growth is seen slowing to 2.1% from 2.4%. Further, increased uncertainty ahead of the UK Prime Minister Theresa May’s speech on the first day of the Brexit/EU Summit starting later today adds to the weight on Sterling.


US construction data yesterday did not live up to expectations with both Building Permits (MoM) and Housing Starts (MoM) falling short of forecast, but the market shrugged it off. The Federal Reserve Beige Book showed little change with further reports of labour shortages, especially for skilled workers, and modest upward pressure on wages.

New York Fed Dudley continued to signal a December rate hike and futures markets have the likelihood of it happening at 90%. US 2-year bond yields rose to the highest level seen since the financial crash of 2008 as 2-year bunds spreads reached 17-year highs. The Dollar was unable to maintain support, the Euro proved resilient, and the 1.1800 barrier was surpassed. Cable was able to recover slightly from intra-week declines to breach the 1.3200 barrier.

Today, US Unemployment is out with expectations of 240k total from 243k last week as well as Philly Fed Manufacturing Index where consensus is a decline to 22.0.


Yesterday’s German Constitutional Court decision in favour of the Bundesbank continuing to buy bonds from the European Central Bank (ECB) provided some Euro support.

Euro sentiment was little-harmed by the Catalan regional government threatening to declare independence with immediate effect should the central government suspends its autonomy. This is mainly due to market disbelief that it will actually happen.

The Euro showed mixed results against its peers as, against the Pound, after weakening on the back of UK data in the morning, it steadied below the 1.1200 region across the rest of the day. Against the Dollar, the Euro showed a gradual strengthening across the day, closing 1.1812.

Data To Watch:

09:00 EUR Deadline to confirm if Catalonia declared the Independence
09:30 GBP Retail Sales ex-Fuel (YoY) (MoM) (Sep), Retail Sales (MoM) (YoY) (Sep)
n/a EUR European Council meeting
13:30 USD Initial Jobless Claims (Oct 13), Continuing Jobless Claims (Oct 6), Philadelphia Fed Manufacturing Survey (Oct)
14:30 USD Fed’s George Speech
19:00 USD Monthly Budget Statement (Sep)


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