Sterling – Are U-K?
Sterling is trading marginally higher this morning, at roughly 1.28 against the USD and 1.12 against the EUR ahead of the UK labour market report due later today.
The market will be watching the wage growth figures especially closely, with Average Earnings excluding bonuses expected to hold around 2.7%. A positive surprise will ever-so-slightly ease the poor sentiment surrounding the Pound and hence, any slight rise higher might turn out to be short-lived amid the ever increasing prospect of a no-deal Brexit.
Brexit continues to be problem for the UK economy and markets are finding it difficult to put a value on the Pound. Hard-line Brexiteers are set to force a showdown with Prime Minister Theresa May and her current negotiation strategy with the European Union, whilst Conservatives are planning on releasing the ‘blueprint’ for a hard Brexit after vowing to outright reject any proposal from the Chequers meeting.
The UK labour market report today is expected to confirm the previous strength, with wages rising 2.7% YoY in June, while the unemployment rate is set to remain stuck to a 4-decade low of 4.2% in July.
The US dollar was seen mixed yesterday, although the Dollar index, which rates the greenback against a basket of its major currency rivals, rallied to new highs.
US President Donald Trump signed a fresh defense spending bill, which includes tapered measures on China, in which China has already stated they will be conducting a comprehensive assessment on, as it pertains to domestic business interests.
Late in the US session saw some nerves settling upon reports that Turkey would release the detained American pastor. This was denied by the US embassy in Turkey, however, the White House confirmed that the Turkish ambassador had met with US national security advisor Bolton.
Problems still remained in Turkey, and the uncertainty that comes with that ensured that the Euro performed poorly against the Dollar. Versus the sterling, however, the currency performed OK nudging back over 1.12, this is probably due to the fact that GBP is seen as being less exposed to Turkey.
In more positive news, German GDP rose 0.5% QoQ in Q2, and Eurozone GDP is expected to follow suit. There is still a sense that Brexit looms as a larger threat to volatility than the Turkish crisis which seems to be ebbing away slightly.
There is a reasonable amount of data coming out today, including German GDP, French CPI, and EU GDP, with the final two figures garnering the most volatility this morning.
Data to watch:
09:30 GBP Average Earnings including Bonus (3Mo/Yr) (Jun)
09:30 GBP Average Earnings excluding Bonus (3Mo/Yr) (Jun)
09:30 GBP ILO Unemployment Rate (3M) (Jun)
09:30 GBP Claimant Count Change (Jul)
10:00 EUR Gross Domestic Product s.a. (YoY) (Q2)
10:00 EUR Gross Domestic Product s.a. (QoQ) (Q2)
10:00 EUR Industrial Production s.a. (MoM) (Jun)
10:00 GER ZEW Survey – Economic Sentiment (Aug)
10:00 GER ZEW Survey – Current Situation (Aug)