UK Data, Turkey in Focus

Contagion fears continued to drive markets yesterday. UK labour market data and Turkey headlines are key today.

Previous Day's Market Highlights

Exchange rates were little changed yesterday amidst a quiet economic calendar and as markets focused on Turkey and contagion fears, which have weighed on emerging market currencies and equities. Turkey’s central bank vowed to take “all necessary measures to maintain financial stability”. The lira briefly gained on the statement but overall remained subdued.
 
Sterling-euro held around 1.12, while sterling-dollar failed to regain 1.28. Euro-dollar recovered 1.14 but continued to trade at some of its lowest levels since July 2017. The pound and the euro made additional gains overnight after some easing in concerns over Turkey after the central bank took steps to support the lira.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1307 1.1342 1.1073 2.07%
GBP/USD 1.2797 1.3269 1.2723 4.11%
EUR/USD 1.1425 1.1750 1.1365 3.28%
GBP/AUD 1.7604 1.7849 1.7284 3.17%
GBP/NZD 1.9389 1.9542 1.9077 2.38%
GBP/CAD 1.6755 1.7411 1.6642 4.42%

Today's Market Highlights

The calendar picks up pace more quickly this week. Up first today is the UK’s latest labour market report (09:30 BST). Average Earnings and the Unemployment Rate are forecast to have remained steady in June and Claimant Count Change to have slowed in July. Overall, then, the data may be little changed and therefore have a limited impact on the pound. A surprise to the upside would be needed to offer some relief and distract from the pound’s recent vulnerability.
 
Shortly thereafter, attention shifts to the euro (10:00). Economic Sentiment is forecast to remain negative in both Germany and the Eurozone as a whole, if improve slightly, while the second estimate of Q2 GDP is projected to show that the economy grew at the same pace as in Q1. Again, while important data, the overall market impact may be limited unless there are any surprises.
 
In the afternoon, the US releases Import and Export Price Indices (13:30), which typically have a muted impact on the dollar. Markets will continue to keep an eye on any further headlines regarding Turkey.

Today's Economic Calendar

Time Currency Release Consensus Previous
9:30am GBP Average Earnings Including Bonus 3M/Yr (Jun) 2.5% 2.5%
9:30am GBP Average Earnings Excluding Bonus 3M/Yr (Jun) 2.7% 2.7%
9:30am GBP ILO Unemployment Rate 3M (Jun) 4.2% 4.2%
9:30am GBP Claimant Count Change (Jul) 3.8K 7.8K
10:00am EUR German ZEW Economic Sentiment (Aug) -20.0 -24.7
10:00am EUR Eurozone ZEW Economic Sentiment (Aug) -16.4 -18.7
10:00am EUR Eurozone GDP s.a. YoY (Q2) 2.1% 2.1%
10:00am EUR Eurozone GDP s.a. QoQ (Q2) 0.3% 0.3%
1:30pm USD Export Price Index YoY (Jul) 4.2% 5.3%
1:30pm USD Import Price Index YoY (Jul) 4.6% 4.3%

Caxton