Record numbers working
UK unemployment fell to a 44-year low of 4.0% in the three months to December, beating the forecast of no change. Employment over the same period showed a robust 141,000 jobs added but there was also over 20,000 added to the jobless claimant count. Headline average earnings edged up to 3.4% in the year, the strongest reading for over 10 years, while core earnings were unchanged at 3.3%. The Pound had strengthened in the run-up to the data releases and gained a little immediately after.
MPs spent the day submitting multiple amendments to the government’s framework bill ahead of the next scheduled vote on the 29th. Sterling gained on expectations that parliament would manage to block a ‘no-deal’ Brexit or extend Article 50, pushing above 1.2950 against the Dollar and 1.1400 against the Euro.
The Pound has corrected slightly this morning with the uncertainty triggering liquidation of some long positions (bets the Pound will rise), although there has been buying action when the price dips; further volatility expected.
US existing home sales declined 6.4% for December compared with consensus expectations of 1.0%. The annual rate declined to 4.99mn from 5.33mn previously and the lowest reading for three years which revived concerns over the housing sector.
With the US government shutdown going on for 32 days, the cost to the economy could exceed $5 billion and the economic impact will be more significant than past years as furloughed employees with no paychecks struggle to make ends meet. So far the shutdown has been great for the US Dollar and stocks because no news is good news. The delay of data releases that would have otherwise confirmed that the economy is losing momentum helped US assets stabilize at the start of the year.
According to the Financial Times, the Trump administration rejected China’s offer for preparatory trade talks ahead of Vice Premier Liu He’s visit at the end of the month. This suggests that not enough progress has been made in the U.S.
The German ZEW investor confidence index bucked the European trend recently and came in above consensus. This, however, seemed to have little effect on the Euro as wider Eurozone confidence was still low following a dip in the current conditions component.
Versus the Dollar, the Euro struggled to break the mid 1.1350s and hit a low of 1.1336. There was a late Euro rally as the Dollar lost support but a lack of confidence in global growth helped stabilise the Dollar.
Early trading today has seen very little movement, with the market seemingly reluctant to take any positions before the European Central Bank (ECB) monetary policy update on Thursday. There is very little data due out for the Eurozone today.
Data to watch:
24H CHF World Economic Forum – Davos
03:00 JPY BoJ outlook report (Q4)
03:00 JPY BoJ Monetary Policy Statement
03:00 JPY BoJ Interest Rate Decision
04:30 JPY All Industry Activity Index (MoM) (Nov)
n/a JPY BoJ Press Conference
13:30 CAD Retail Sales (MoM) (Nov)
13:30 CAD Retail Sales ex Autos (MoM) (Nov)
23:50 JPY Foreign investment in Japan stocks (Jan 18)