Strong jobs data drives pound rebound

An overwhelmingly positive set of UK jobs figures has helped the pound punch higher this morning. However, the move in sterling means the FTSE 100 is paring early gains.

• FTSE pushes higher early amid risk-on sentiment, but gains being pared

• UK jobs market in rude health

• Draghi unlikely to provide policy shift next week

The risk-on rally has continued apace this morning, with the FTSE hitting a new high for the week, although the gains have been pared in response to a sterling rebound. Fears of a conflict between the US and North Korea appear to have been left behind for now and the focus is clearly upon the positives. European markets are benefiting in particular from the recent dollar strength.

Today’s UK jobs data proved overwhelmingly positive, with outperformance across the board helping the pound to regain ground lost yesterday. The UK unemployment rate fell to a 42-year low, while a 4,200 drop in the July claimant count pointing towards the possibility of yet another shift in unemployment in August. Perhaps the most encouraging figure was the jump in average earnings, with a jump to 2.1% helping improve real earnings by narrowing the gap between earnings and inflation to 0.5% from 0.8%.

Expectations of a big announcement from European Central Bank President Mario Draghi at next week’s Jacksons Hole Symposium have been dealt a blow, with an ECB spokesman saying that Draghi will not provide any new policy announcements. Eurozone inflation has eased back over recent months, and so the pressure on the ECB has lessened somewhat, reducing the chance of a hawkish shift.

Ahead of the open we expect the Dow Jones to open 41 points higher, at 22,040.