Employment data beats but GBP reverses

A batch of better than expected data on the UK labour market saw a short term boost in the pound following on from Tuesday’s gains but sterling has since reversed sharply after briefly moving back above the 1.32 handle against the US dollar and now trades lower on the day. The FTSE has fallen further this morning and the index has dropped below the 7400 level to trade at a 6-week low.

Wages rise as claimant count falls

The most recent employment data out the UK has exceeded forecasts with the average earnings index 3m/y coming in at 2.2% vs 2.1% expected whilst the claimant count change fell to +1.1k against consensus calls for a +2.0k print. The unemployment rate remains flat at a 42-year low of 4.3%. The pick-up in wage growth, which also included a slight upwards revision to the prior reading, will be seen as a positive for workers, but the pace of the growth remains well below current inflation meaning that in real terms workers are still substantially worse off.   

Pound remains range bound

The substantial drop seen in sterling at the start of the month following the dovish hike from the BoE has failed to see any follow through and the subsequent trade in the near 2-week period since the announcement has seen the market remain inside that day’s range. Tuesday’s lower than expected CPI release offered bears a chance to push home their advantage but a failure to break what now looks like key support at 1.3040 saw a fairly strong recovery in the late afternoon. The market popped to its highest level of the week this morning following the release but has been met with a fairly firm rebuttal above 1.32 and the path of least resistance appears to remain to the downside.    

FTSE continues to decline

The UK’s leading stock index looks set for another day of losses with the market currently trading at levels not seen since the start of October. The FTSE looked nicely poised just 2 weeks ago to join in the latest leg higher in global stock market rally which saw Japanese stocks hit a 25-year high and all-time peaks recorded in Germany and the US, but a failure to do so has left the market vulnerable to a correction. Mining companies are amongst the worst performers this morning with Glencore, Anglo American and BHP Billiton all lower by more than 2%.

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