UK hits new employment record
UK employment figures impressed with a record high of 32.6m in the three months to December. Jobless claims were higher than expected but headline unemployment remained at 4.0%, the lowest since 1975. Headline annual average earnings growth was unchanged at 3.4%, fractionally below expectations of 3.5%, with the core reading unchanged at 3.4%.
There were further parliamentary moves to ensure that a no-deal Brexit is ruled out and the Pound started to move up around midday. Theresa May’s talks with EU Commission President Jean-Claude Juncker were described as significant. Proposed changes to “the deal” are due to be revealed today and speculation of a breakthrough increased, although inevitably, uncertainty remained high with ‘no-deal’ reports continuing. Sterling broke above 1.3000 against the Dollar, triggering further buying to peak above 1.3050 before a limited correction. The Pound also reached 1.1500 against the Euro and currently hovers in the vicinity.
The US-China trade talks continue today, which is a quiet day for financial data. We’ll be watching for minutes from the Federal Reserve (Fed), as talks of incremental interest rate increases have eased back. The Fed will release the minutes at 7 pm GMT today.
The US NAHB builder confidence index strengthened to 62 for February from 58 and was above consensus forecasts. Cleveland Fed President Mester stated that the Fed Funds rate may need to move a bit higher if the economy performs in line with her expectations. She also commented that she would be comfortable with ending the process of running down the balance sheet before the end of this year.
We also saw reports yesterday that the US was pushing for a stable Yuan and that tariffs would be imposed if this condition was violated. The Dollar dipped lower, especially given increased speculation that the US would push for a weaker currency.
As the US currency lost traction, the Euro advanced to highs just above 1.1350. New York Fed President Williams stated that monetary policy is where it should be with rates around neutral and there was a strong argument for taking some time on rate hikes given recent mixed data.
Yesterday saw a rare day where the Euro performed well and the Dollar struggled slightly. The German ZEW investor confidence index improved from -15.0 to -13.4 and Italian industrial data was weak with orders declining in the year to December. These factors initially cause the Euro to dip slightly versus the Dollar to around the 1.1280 level.
Later in the trading session, dovish statements from a known hawk in the US Fed weakened the Dollar which pushed the Euro back above the 1.1300 level. Late in the session, there were reports in the US that tariffs would be imposed if the US did not push for a stable Yuan which saw EURUSD hit 1.1350.
Today’s docket sees the German producer price index, the European Central Bank’s (ECB) Praet speech and industrial production out of Switzerland. Focus, however, will be on May’s meeting with Juncker today and any news that comes from it. Speculation yesterday for a positive result saw the Pound rise slightly.
Data to watch:
00:30 AUD Wage Price Index (QoQ) (Q4)
07:00 EUR Producer Price Index (MoM) (Jan) (Germany)
07:00 EUR ECB’s Praet speech
08:15 CHF Industrial Production (YoY) (Q4)
08:15 CHF Industrial Production (QoQ) (Q4)
17:30 GBP May – Juncker meeting
19:00 USD FOMC Minutes
23:50 JPY Foreign investment in Japan stocks (Feb 15)