UK Labor Data Cools Cable’s Rally

UK Labor data cools cable’s rally
ZEW misses badly
Nikkei 0.06% Dax 0.76%
Oil $66/bbl
Gold $1342/oz.
Bitcoin $8130

Europe and Asia:
AUD RBA Minutes dovish slant
GBP UK Claimant Count 11.6K vs. 5K eyed
GBP UK Wages 2.8% vs. 3.0%
EUR ZEW 1.9 vs. 7.3

North America:
USD Building Permits/Housing Starts 8:30
USD IP 9:15

Cable spiked to fresh post Brexit highs in early London trade today, but the rally lost its legs after UK Labor data missed its mark.

UK Claimant count expanded to 11.6K from 5K eyed while average earnings came in at 2.8% versus 3.0% forecast showing that wage growth remains tepid. The ILO unemployment rate however improved slightly to 4.2% from 4.3% projected. Overall the labor data news showed a slowdown in UK growth, but not to an extent that’s likely to prevent the BoE from hiking rates in May.

Cable has been on a one-way trip higher since the middle of last week, buoyed by EURGBP flows and upbeat sentiment about Brexit talks and the momentum in the pair remains strong irrespective of the data. Still, today’s news did not help the bulls as it clearly showed that UK economy is slowing which will make the task of normalization more difficult for BOE. For now, however, all focus is on 1,4400 figure and if the pair can recapture the 1.4370 highs later in the day, bulls will make an all-out effort to run the stops the figure.

The whiff of a slowdown was evident in Europe as well where the ZEW survey missed the forecast at 1.9 versus 7.3 and that caused the euro to back off the 1.2400 figure as the pair dropped to 1.2368 by mid-morning dealing.

Despite the weak data from the across the pond, the dollar saw little demand today with USDJPY breaking below the 107.00 figure and hugging that level for most of the night. US calendar is barren except for Housing starts data, but the pair could see further pressure if risk aversion flows kick in. Despite decent US data and a rise in US yields, USDJPY has not been able to muster enough power to move through the 107.50 resistance and given the weak price action so far, the shorts may try to push it lower as yet another breakout in the pair fails.

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