UK unemployment hit pre-crises levels

Yesterday we witnessed yet another positive day for Sterling as it solidified itself as the “go to” currency in the market for the moment. The Pound was on the front foot following the all-important UK Unemployment Figures which matched consensus at 6.5%, down from 6.6% last month and now in-line with the levels we saw in 2008. With inflation almost on target, unemployment continually improving and the UK recovering seemingly in full stride, whispers are rife again as to when the BOE will raise interest rates. It wasn’t all good news for Britons though as Average earnings show that the waves of good data have yet to reach the UK consumers pocket. Average Earnings showed a shortfall from last month at 0.7% excluding bonuses and 0.3% including. It is likely that it will take a while for inflation and average earnings to meet, however, the balance will be restored should the recovery continue on the current course. As a result of positive UK unemployment data the Pound hit fresh 22 month highs against the Euro, posting 1.2669 on the top end.

The Euro’s woes were added to yesterday and it was left gasping for air with no data on the calendar to stem the blow from its most traded counterparts. As aforementioned, losses were taken against Sterling after the impressive unemployment data from the UK and as the day progressed the resilience of the bloc currency waivered. As Fed Chair Janet Yellen testified in the US the Euro only reaffirmed its position against the Greenback in the low 1.35’s, having lost the 1.36 handle on Tuesday. Poor domestic data from the Euro bloc and the developing recovering in the States are the reasons behind the weakness in the pair, which continues to challenge levels last seen in mid-June. Forecasts are suggesting that the pair is likely to trade lower; however, the 1.3503 support level might be Euro’s only saving grace for the short term. Today in the Eurozone we have the release of CPI inflation data at 10am. Consensus sits at 0.8% but a figure that falls even slightly short is likely to weaken the Euro considerably.

The main focus point for the Dollar yesterday came mid-afternoon via Fed Chair Janet Yellen’s testimony. The USD has been firm since the initial testimony on Tuesday and has threatened the highs of its recent ranges against most of the G10 currencies. Unfortunately, yesterday’s focus point became a regurgitation of the same information from Tuesday as Yellen stuck to the script as she was quizzed by Republican lawmakers. As a result we were not given any further indication as to how the FED plans to move forward. Interest rates were once again called into question with Yellen taking a similar stance to Carney in saying that should the economy continue to strengthen as expected for the second half of this year, an interest rate rise could well be on the cards by Q1 next year “maybe sooner”. Today we have the release of Housing data in the US by way of Building Permits and Housing Starts at 13:30pm; followed by the perhaps more important Initial and Continuing Jobless claims – with the employment data in the States being exceptional of late it will be interesting to see if these figures follow suit. Next on the agenda we have the release of the Philadelphia Fed Manufacturing Survey. With recent industrial production data proving adequate rather than strong – the USD needs more encouraging data to make a renewed attempt on the upside.