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UK unemployment rate rose to 4.3% in the three months to March
Sterling started the week on the front foot, as GBP/EUR briefly climbed higher yesterday before falling back to around parity with last week’s levels. The US dollar gained around two-tenths of a per cent against the euro yesterday while GBP/USD was essentially unchanged at the close.
UK unemployment figures this morning came in unchanged at 4.2% in the three months leading to October. Perhaps more significantly, the pace of wage growth (including bonuses) slowed to 7.2% against an expected 7.7%, some good news in the country’s fight against inflation.
All eyes are on central banks this week, with the Bank of England (BoE), European Central Bank (ECB) and Federal Reserve (Fed) poised to deliver their latest interest rate decisions. Last week’s labour market strength in the US has dampened expectations that the Fed could be tempted to cut soon.
Yesterday wasn’t exactly a bumper day of macro data, but things pick up today to set the scene for a crucial week. Markets are forecasting today’s German ZEW economic sentiment index to dip, although only by a point or so – nothing too hair-raising.
We’ll also get US inflation reads this afternoon. Core inflation is expected to nudge up slightly, to 0.3% from 0.2% last month, while the headline figure is forecast to show little change.
European stock indexes ended Monday higher, the exception being London’s FTSE 100, which closed down 0.1%. There was a sense of treading water yesterday, with investors eager to pour through the next set of data before they chose their next move.
UK prime minister, Rishi Sunak, is gearing up for a crunch day in his premiership. The government’s controversial immigration bill is in the firing line, with today’s vote widely seen as a test of Sunak’s leadership. Conservative MPs are playing their cards close to their chests as the outcome remains uncertain.
The Israeli shekel fell by 0.5% against the US dollar yesterday as the country’s war with Hamas dragged on. The Israeli central bank had earlier warned that increased military spending could serve to boost inflation.
A draft agreement from the UN COP28 climate summit has dropped references to the phaseout of fossil fuels in favour of reducing consumption, after opposition from oil and gas-producing countries led by Saudi Arabia. The draft still needs approval from around 200 countries, many of whom are likely to be strongly opposed to watered-down language.
In unexpected acquisition news, analysts have highlighted mining behemoth Anglo-American as a target for a potential takeover. The London-listed company’s stock is down nearly 45% this year following a bruising period marked by big cuts to its production outlook.
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GBP: Wage growth moderates
GBP/EUR briefly climbed even higher on Monday, before it settled back into similar levels from last week. That’s still around the highest it’s been in three months.
UK unemployment figures dipped down slightly, but the more significant read was probably the decline in wage growth. Average earnings including bonuses slowed to 7.2% in the three months to October versus the previous 8% and well above forecasts.
GBP/USD: the past year
EUR: Bobbing along for now
The euro fell slightly against the US dollar while trading mostly flat against the pound in yesterday’s session.
It was a relatively sleepy start to the week for the euro market. Without much data to analyse, markets will keep an eye on the ZEW Economic Sentiment Index today, but the big test will come on Thursday with more inflation reads and the ECB’s announcement of its interest rate decision.
USD: Sticky inflation
The US dollar made small gains against major rivals yesterday, although its progress did not seem to be driven by anything concrete.
Today’s inflation reads are expected to show that decreases to both the cut and core rates slowed somewhat in November. Given policymakers’ fears of entrenched inflation, that perhaps should not fill us with confidence that the Fed will dust off their rate scissors too soon.
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