UK celebrates job data with retail therapy
Surprisingly strong employment data from the UK set the tone early yesterday for Sterling, stopping the losses seen earlier in the week. The claimant count was significant with a reduction of 8.6k in July. This shows that the EU referendum may not have had such significant short term impact on the UK economy as first feared. The unemployment rate remained unchanged at 4.9% and average earnings also ticked up 0.1% to 2.4%.
Sterling was resilient after the employment data was released. Support held it above 1.3000 against the Dollar while the Euro was unable to make any fresh attack on the 1.1494 level against the Pound, with the currency gaining some support from a renewed increase in oil prices. There will be further volatility as UK retail sales data is published today. This is because a recent survey from the British Retail Consortium showed that heavy discounting is fuelling demand.
The Dollar started and ended the day at largely similar levels versus Sterling. The Federal Open Market Committee minutes demonstrated the members’ divided opinion as to whether a raise in interest rates would be suitable in September or not. Most members wanted to see more data to confirm that the economy was strong enough to withstand higher interest rates, especially as inflation is still low.
Positive payroll data in July also showed more confidence in the labour market to FOMC officials, who noted the relief of having no financial stress after the UK referendum vote. GBPUSD opened this morning at around the 1.3040 levels.
The Euro was relatively stable versus Sterling during yesterday’s European trading session as there was no data to move markets. The single currency ended the day at around the the 1.1545 levels; only up 0.18% against the Pound. The Euro will be volatile today as the Eurozone Consumer Price Index for July is due 30 minutes after the UK Retail Sales.
Data to watch: 9.30am UK July Retail Sales. 10am EUR July Consumer Price Index. 1.30pm US Initial Jobless Claims.