Bullish labour data gives the Pound a boost

Yesterday’s markets

21st July 2016

  • GBP Average Earnings Index 3m/y: 2.3%
  • GBP Claimant Count Change: 0.4K
  • GBP Unemployment Rate: 4.9%
  • USD Crude Oil Inventories: -2.3M
  • AUD NAB Quarterly Business Confidence: 2

After Tuesday’s firmer inflation readings, yesterday's markets were watching the UK labour market data. The headline unemployment rate figure crept lower in May to 4.9%, marking its lowest level since 2005. The Average Earnings Index figure also improved by registering at 2.3%, whilst Claimant Count Change ticked lower to 0.4k. The stronger than expected data helped to boost the Pound, however the move was relatively short lived as investors are still anticipating some form of easing from the Bank of England next month. 

Across the pond, US equities began with heavy gains as investors were bullish about Morgan Stanley’s earnings results. This further adds fuel to the fire for the US to raise interest rates this year. A Citigroup gauge that tracks the degree to which US data are exceeding projections, is at an 18 month high and the futures market predict the chance of a Federal Reserve rate increase this year will be 44%, up from 9% at the end of June.

Today’s markets

20th July 2016

  • GBP Retail Sales m/m
  • GBP Public Sector Net Borrowing
  • EUR Minimum Bid Rate
  • EUR ECB Press Conference
  • USD Philly Fed Manufacturing Index
  • USD Unemployment Claims
  • USD Existing Home Sales

The main focus of the day will be on Mario Draghi and the ECB rate decision. The ECB is not expected to change its monetary stance, however, Draghi is likely to ask for the governments to do more to boost the euro zone's economy in the coming week. This comes as the fallout of Britain's vote to leave the EU and weaker global growth threaten the bloc's fragile recovery.