UK Employment Data Had a Short-Lived Support to the Pound

Market Reviews

The British pound weakened after initial growth on strong report on the UK labor market and news about the progress of the Brexit negotiations. Still, sterling remains the strongest one for the week. US dollar is trading as the strongest one for today, followed by Swiss franc and Canadian dollar.

The UK unemployment rate held steady at 4.0% in July, as expected. Average earnings, excluding bonuses, rose by an annual 2.9% in the three months to July, above expectations for a 2.8% and faster than the 2.7% seen in the previous month. Including bonuses, pay growth rose by an annual 2.6%. Analysts had expected the reading to hold steady at June’s 2.4% gain.

The American currency was boosted by escalation of US-China trade tension. US President Donald Trump is ready to impose 25% tariffs on USD 200B in Chinese import any time, as public hearing ended last week already. China is also prepared for retaliation on USD 60B of US goods, with tariffs from 5% to 25%. Trump is also ready to start the process for tariffs on another USD 267B in Chinese products.

Euro was lower versus major currencies, despite optimistic ZEW data. German ZEW Economic Sentiment improved to -10.6 in September, up from -13.7 and beat expectation of -13.4. Current Situation index rose to 76.0, up from 72.6, above expectation of 72.3. Eurozone ZEW Economic Sentiment rose to -7.2, up from -11.1, beat expectation of -14.9. Current Situation index rose 1.7 pts to 31.7.

Global shares were mostly down today. In Europe, FTSE fell by 0.56%, DAX was down 0.65%, CAC dropped by 0.39%. In Asia, Nikkei gained 1.3% to 22664.69 but Hong Kong HSI lost 0.72%, Singapore Strait Times dropped by 0.35% and China Shanghai SSE decreased by 0.18% to 2664.8.

The UK Treasury announced today that the bank of England Governor Mark Carney will extend his term until January 2020. Carney has originally planned to step down in June 2019. Mark Carney has agreed to stay in his role for a further seven months to support a smooth exit from the European Union and provide vital stability for our economy.