UK wages beats forecast, GBP muted

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Uk inflation_BoE_2003

Today’s Economic events

  • Australia MI leading index m/m-0.20% vs. 0.10% previously
  • UK average earnings index 2.10% vs. 2.0%
  • UK Claimant count change -18.0k vs. -8.8k
  • UK unemployment change 5.10% vs. 5.10%
  • Canada manufacturing sales 2.30% vs. 0.40%
  • UK Annual budget release
  • US building permits 1.17mn vs. 1.20mn
  • US housing starts 1.18mn vs. 1.15mn
  • US CPI m/m -0.20% vs. -0.20%; Core CPI m/m 0.30% vs. 0.20%
  • US Capacity utilization rate 76.70% vs. 76.90%
  • US Industrial production m/m -0.50% vs. -0.10%

Coming up

  • Crude Oil inventories
  • FOMC Statement
  • FOMC press conference
  • New Zealand GDP q/q

The Asian markets opened today on a quiet note heading into the Fed’s meeting. The Yen was weaker as USDJPY managed to make early gains following yesterday’s decline. At the time of writing USDJPY is up 0.35% posting a steady uptrend. The gains come as USDJPY fell to lows of 112.705 yesterday. The Aussie Dollar was weaker as AUDUSD posted the third day of declines, currently down -0.41%. The Aussie had previously tested highs above 0.758 before posting the steady decline. The NZDUSD also remained weak, down -0.32% for the day. The declines came as yesterday’s GDT data showed a decline of -2.90% in dairy prices. The Kiwi is further likely to come under pressure as the quarterly GDP numbers will be released later tonight. Asian markets were mixed with the Nikkei225 closing lower with -0.83% losses while the Shanghai Composite gained 0.21% for the day.

The EURUSD is trading flat as the clock ticks closer to the Fed’s statement. EURUSD is down -0.38% for the day but price action was very flat since late yesterday. The single currency is trading at $1.106 at the time of writing.

In the UK, the monthly jobs report showed a better than expected results across the board. While the UK’s unemployment rate remained unchanged at 5.10%, average hourly earnings beat forecasts of 2.0%, rising to 2.10% while the claimant count change fell by -18.0k more than the forecasted -8.8k. The uptick in wages comes after last month average hourly earnings fell which made the BoE take a cautious approach.

[Tweet “George Osborne: Annual GDP growth estimates cut to 2.0% for 2016 and 2017’s GDP growth – to 2.20%”]

However, with the turnaround in wages ahead of the BoE’s meeting due this week, the data could be seen as being beneficial towards pushing inflation modestly higher. GBPUSD was however muted to the news. At the time of writing, the Cable is down -0.67% for the day, trading at $1.406, an 8-day low. UK’s 2016 budget was released including economic growth outlook. In his budget speech, Chancellor George Osborne said that Office for Budget Responsibility revised down the annual GDP growth estimates to 2.0% for 2016 while 2017’s GDP growth forecasts were cut down to 2.20%. In the budget speech, the Chancellor cautioned against global slowdown highlighting the concerns from China, Brazil, and Russia, which could keep demand muted. European equity markets were trading lower with the German DAX down -0.07% and the London FTSE100 down -0.03% at the time of writing.

The NY session opened with US consumer inflation data showing a decline of -0.20% on the headline as expected but core inflation ticked higher at 0.30% above estimates of 0.20%. US building permits and housing starts data released at the same time showed and an increase of 5.2% on housing starts, beating estimates of 4.5% month over month growth with previous month’s data being revised higher from -3.80% to -3.40%. Building permits, however, declined -3.10% more than the anticipated decline of -0.10%. US capacity utilization rate fell to 76.70% against estimates of 77.0% while industrial production fell -0.50% for the month, below forecasts of -0.20%. The data comes ahead of the Federal Reserve’s press conference and monetary policy statement due in a few hours time. US equity market futures were showing a weaker open today with the Dow Jones futures down -0.23% and the S&P500 down -0.37% lower ahead of the opening bell.

Other data due for release later today includes the New Zealand quarterly GDP print.

On the commodity front, Gold prices remained weak, down -0.22% for the day although price action has been largely flat. However, Gold remains biased as long as prices are below the $1250 level. WTI Crude Oil prices are down for a second day losing -3.51% at the time of writing. Crude Oil futures for April delivery was seen trading at $37.13 a barrel ahead of the weekly Crude Oil inventory report where forecasts are for a buildup of 2.9 million barrels in stockpiles.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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