Unemployment Tsunami hits UK shores
Sterling reversed most of Friday’s losses as it edged higher against the Dollar yesterday, climbing from below 1.2100 to breach the 1.2200 mark by the afternoon. The comeback against the Euro was limited to half a cent, and completely disappeared in the hour before the close.
This morning the ONS have published job figures for the first three months of 2020, incorporating the “voluntary lockdown” on March 16 and the strict laws that followed one week later, and this is just the start of the impact. UK jobless claimants have risen by 856,500 to 2.1 million in April, and the claimant count rate rose from 3.5% in March to 5.8% in April. Bucking the trend, ILO Unemployment actually dropped from 4% to 3.9%. As this period covers just the first week of enforced lockdown the total is likely to worsen sharply in the coming months. Jagjit Chadha, director of NIESR stated: “We can reasonably expect unemployment to rise very quickly to something over 10% – something we haven’t seen since the early 1990s.” The UK set out its tariff plan for global trade when it fully leaves the EU at the end of this year. Some 60% of total trade will reportedly come in tariff-free under the plan, compared to 47% currently. Tariffs will be maintained on cars, beef, lamb and poultry, but dishwashers and freezers will be able to enter the UK tariff-free as of 1st January 2021.
Massachusets-based Moderna announced that its initial vaccine trial has shown that subjects have developed antibodies for COVID-19. While the experiment is of limited scale – only eight people – the encouraging results have sent stocks rallying. The next phase is due in July.
Markets are also encouraged by the message due out by Jerome Powell, Chairman of the Federal Reserve (Fed). In his prepared remarks, Powell pledged to keep rates low until the US returns to full employment and his tone was more optimistic than in an interview over the weekend. He will speak before a Senate Committee alongside Treasury Secretary Steven Mnuchin.
Fed’s Powell and Treasury Secretary Mnuchin will testify before the Senate Banking Committee later today as well as data on Building Permits and Housing Starts are due along with the speech by Boston fed Rosengren.
The Euro rose to make its biggest single-day gain in over 7 weeks against the Dollar yesterday. The currency pair, currently trading just above the 1.0940, made a two-week at 1.0927 on Monday only to surpass the prior level at the start of today’s trading session.
Looking ahead, a dip in strength could occur should the German Zew survey indices disappoint market expectations. The data is scheduled for release this morning alongside the Eurozone’s Zew survey.
Data to watch
06:00 – GBP – Claimant Count Change
12:30 – USD – Building Permits
14:00 – USD – Fed Chair Powell Testifies
All Day – All Currencies – G7 Meetings