The FTSE climbed higher across most of today’s session supported by a weaker pound, following a mixed labour report and the house builders following promise of a higher dividend by Taylor Wimpey.
The pound was unimpressed by the UK labour report despite their being several points to cheer. The unemployment rate remains at a multi decade low of 4.2% as expected, whilst the closely watched average wage growth figure was also in line with expectations, increasing by 2.9% in the three months to March, up marginally from 2.8% the previous month. Given that inflation in March was 2.5%, wage growth at 2.9% was greater. This is good news for the economy as it means that domestic inflation should start to creep higher, potentially keeping a BoE interest rate rise still on the table later in the year.
Despite in line wage growth and unemployment, investors were shaken by an increase in the number of people seeking the unemployment benefit. The claimant count rose by 31.2k against just 7.8k forecast, a significant increase, so much so that it changed the tone of the report to a distinctly negative one in the eyes of the market. Rising claimant counts is a negative signal for the future labour market, signalling a possible loosening of the market going forward rather than a tightening that the BoE is seeking to revive optimism of a rate hike.
The pound initially pushed higher before falling heavily as invested digested the higher claimant numbers vs in line wages growth. Sterling is trading back below $1.35 at fresh 4-month lows underlining just how sensitive sterling is at the moment to this labour report. Just last month slightly weaker than forecast wage growth triggered the 900 points sell off in the pound from $1.4370 to $1.3460. Whilst another sell off of this magnitude is extremely unlikely, I think it’s safe to say that the pound will be languishing here for a while, particularly given that there is no more high impacting UK data this week to pick the pound up from these levels.
US 10 year yields hit 3.05%
The dollar was notably stronger on Tuesday after retail sales hit expectations at 0.3% month on month and treasury yields climbed to 3.05%, the highest level since 2011. Higher yields whilst supporting the dollar unnerved investors, pushing US equity indices lower on the open. The Dow dropped 200 points in early trade with demand dampened by higher yields, reflecting higher interest rate expectations, which is not such good news for corporate borrowing.
CFD and forex trading are leveraged products and can result in losses that exceed your deposits. They may not be suitable for everyone. Ensure you fully understand the risks. From time to time, City Index Limited’s (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material. As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed
Recommended Content
Editors’ Picks
USD/JPY flat-lines below 151.50 after soft Japanese CPI data
USD/JPY stays defensive below 151.50 after the release of a soft Japan's CPI report and mixed Industrial Production and Retail Sales data on Friday. Japanese verbal intervention also weighs on the pair amid the holiday-thinned conditions on Good Friday. US PCE inflation awaited.
AUD/USD buyers lack vigor above 0.6500 amid Good Friday trading lull
AUD/USD is trading listlessly above 0.6500 in the Asian session amid light trading on Good Friday. The Aussie pair shrugs off encouraging comments from China's FX regulator, as price action remains subdued ahead of the US PCE inflation data.
Gold flirts with record highs above $2,230, all eyes on US PCE data
Gold price flirts with record highs around $2,230 during the Asian session on Friday. The uptick of yellow metal is bolstered by the safe-haven flows amidst growing economic concerns and the prospect of interest rate cuts from the US Federal Reserve.
Optimism price could fall as nearly $90 million worth of OP tokens is due flood markets
Optimism volatility has shrunk in the ours leading to the network’s cliff unlock. It joins the likes of dYdX and Sui, which have similar events on their calendars. As token unlocks are often considered bearish catalysts, investors should brace for a reaction after the event.
Will they won’t they cut rates is the question of Q2?
There has been some significant push back from Fed and Bank of England members around the timing of rate cuts, and the Bank of Japan still haven’t physically intervened in the FX market to stem yen weakness although they are threatening to do so.