16th May 2018 Market Update
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?? GBP – The pound fell nearly 0.5% against the USD after data releases suggested a slowdown in the UK’s wage growth and much higher than expected claimant count. Average earnings grew at 2.6% compared to figures in December of 2.8%, though this result was widely expected by the market. The claimant count however missed all expectations with a dramatic rise to 31.2k vs an expected 7.8k.
With no data releases in the UK today, investor sentiment could be determined by global macroeconomic factors.
?? EUR – GDP growth across the Eurozone slowed in the first quarter of 2018, pressuring the EUR against most of its counterparts. Data yesterday showed that the Eurozone’s seasonally adjusted flash GDP rose 0.4% on a quarterly basis in the first three months of 2018, in line with market expectations.
Separately, Germany’s flash GDP advanced only 0.3% in Q1 2018, missing the market expectations of a rise of 0.4%.
Today, markets will focus on a speech by the ECB President, Mario Draghi as the Eurozone Ecofin meeting takes place. In addition, inflation data is expected to confirm that core inflation is at a dismal 0.7% y/y in April, but we may see some revisions as further details will be revealed with today’s release. A lower inflation reading will keep the any notion of rate hikes by the ECB at bay and pressure the EUR.
?? USD – US data released yesterday was relatively positive, with retail sales in line with expectations although the excluding autos figure was a bit weaker at 0.3% versus the expected figure of 0.4%. Manufacturing activity in May also saw an encouraging reading as the Empire Manufacturing index has risen to 20.1 in May from 15.8 in April.
Today, will see the release of industrial production, which is expected to show a slight increase and could help the dollar this afternoon.
10:00am: CPI Core YoY expected to remain at 0.7%
13:00pm: ECB President Draghi Speech
13:30pm: Housing starts expected at 1.31M from previous 1.319M
13:30pm: Building Permits expected 1.350M from previous 1.354M
14:15pm: Industrial Production expected at 0.6% from 0.5%
Summary: UK jobs data points to more claimants and slowing wage growth, though the unemployment rate remains static. Sterling lost ground against the dollar yesterday as a result.
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