UK labour data keeps markets entertained before “The Big One”

Yesterday’s markets

16th September 2015

  • UK Average Earnings Index 3m/y: 2.9%
  • UK Claimant Count Change: 1.2K
  • UK Unemployment Rate: 5.5%
  • EUR Final CPI y/y: 0.1%
  • CAD Manufacturing Sales m/m: 1.7%
  • CAD Foreign Securities Purchases: -10.12B
  • US CPI m/m: -0.1%
  • US Core CPI m/m: 0.1%
  • NZD GDP q/q: 0.4%

UK labour data dominated yesterday’s headlines, whilst across the pond the US released a key piece of inflation data. Firstly, UK wages grew at their fastest pace in more than six years and the unemployment rate unexpectedly fell, signaling that UK inflation is beginning to weigh on the UK labour market. Unemployment is now at 5.5% and average earnings posted a reading of 2.9%, both exceeding economists’ consensus. The bullish data suggests that some of the softer releases in recent months were only temporary and that the trend of gradual strengthening continues. Across the pond, the US released their monthly CPI figure. The reading disappointed markets, posting a worse than forecast -0.1%, adding further evidence that the US economy is not ready for a rate hike. 

Today’s markets

15th September 2015

  • BoJ Gov Kuroda Speaks
  • CHF Libor Rate
  • SNB Monetary Policy Assessment
  • UK Retail Sales m/m
  • US Building Permits
  • US Unemployment Claims
  • US Philly Fed Manufacturing Index
  • US FOMC Economic Projections
  • US FOMC Statement
  • US Federal Funds Rate
  • US FOMC Press Conference

The main focus of the week is in the evening after the European markets close and the FOMC release their statement, coined “The Big One”. There is an outside chance of a rate hike in some way shape or form (30% chance). Whilst we do not believe that that Fed will increase by 25 basis points, we believe there is a slim possibility that they could meet the halfway mark with a 12.5 basis point move.

Ultimately, there will never be the perfect time to raise rates but a smaller increase could signal their intentions whilst taking into consideration market conditions. It will be the rhetoric that follows in the press conference that the market will mainly focus on for clues on future policy, action and forecasts. However, before the big event we have other key data readings. From the UK the retail sales numbers will be closely monitored as consumer spending makes up a large proportion of the GDP. In the US there is a host of data before the FOMC meeting. The US weekly jobless claims, building permits and Philly fed manufacturing are due to post.