UK Employment in Focus

A lack of G10 FX volatility saw markets confined to familiar ranges on Monday ahead of today’s UK labour market report.

Previous Day's Market Highlights

Major currencies continued to tread water in familiar ranges Monday as a lack of volatility once again plagued the FX market. The pound did however gain, adding around 0.4% against both the euro and the dollar despite a lack of any economic releases. Some of the move may have been down to significant flows, however markets seem to have once again settled into 'wait-and-see' mode regarding what happens next in Brexit, though any headlines may be limited this week. Meanwhile, the dollar and the euro both had quiet trading days, with neither budging too far from their opening levels. The single currency added 0.1% over the day, its 2nd consecutive daily gain, while the dollar closed flat against a basket of peers. 

Commodity currencies were slightly more volatile, with the Canadian dollar suffering after the Bank of Canada's quarterly business outlook survey fell into negative territory for the first time since 2016. Though not entirely unexpected in light of recent economic data, the pessimistic outlook and moderation of demand in most regions will do little to allay fears of an economic slowdown and shrouds another BoC rate hike in more doubt. The loonie fell around 0.4% over the course of the day. Overnight the Aussie dollar has also lost ground, falling by 0.3%, after minutes from the RBA's latest policy meeting laid the groundwork for a rate cut later this year. Policymakers emphasised that the likelihood of a near term rate hike was low, while commenting that a rate cut would be "appropriate" if inflation were to remain subdued. 

Away from FX, equity markets were also subdued on both sides of the Atlantic. In Europe, the Stoxx 600 added 0.1%, while the US benchmark S&P 500 closed unchanged, dragged lower by financial stocks, after an underwhelming set of results from Goldman Sachs and Citi. Finally, oil prices slid as concerns mounted over a possible hike in Russian output. Both Brent and WTI lost ground, with both falling by almost 1%. 

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1580 1.1787 1.1463 2.75%
GBP/USD 1.3095 1.3269 1.2976 2.21%
EUR/USD 1.1310 1.1448 1.1183 2.31%
GBP/AUD 1.8315 1.8785 1.8183 3.20%
GBP/NZD 1.9375 1.9512 1.8960 2.83%
GBP/CAD 1.7535 1.7795 1.7327 2.63%

Today's Market Highlights

Today's main event is set to be this morning's release of employment data from the UK, an area of the economy that has held up well recently despite Brexit-related uncertainty. Of most interest will be average earnings, expected to remain near post-crisis highs increasing by 3.5% (including bonuses) on a 3-months-on-year basis. Also of note will be the unemployment rate, expected to remain unchanged at 3.9% as well as the claimant count change, likely to print around the 20k mark. Though further evidence of a relatively tight labour market is unlikely to change the BoE's policy stance, upbeat data may help the pound find some support in the near-term. 

Elsewhere, the other notable release from the European session will be German economic sentiment figures, expected to rise into positive territory for the first time since March 2018. Though other eurozone economic indicators remain sluggish, a positive release may help to underpin the single currency. From the US, industrial production figures will be eyed, with markets looking for a 0.2% month-on-month increase. Though not typically market-moving, the figures may take on more significance than usual in light of a global slowing in production. Overnight, focus will fall on CPI inflation figures from New Zealand, with expectations for inflation to have fallen to 1.7% on a year-on-year basis in the first quarter. A further downtick in inflation may intensify calls for the RBNZ to cut interest rates and thus weigh on the kiwi dollar.

Central bank speakers are relatively thin on the ground today, with only the Fed's Kaplan due to speak this evening. Finally, earnings season continues in the US, the main highlight being Bank of America reporting before today's market open.

Today's Economic Calendar

Time Currency Release Consensus Previous
9:30am GBP Unemployment Rate 3.9% 3.9%
9:30am GBP Average Earnings - Inc. Bonus (3m/y) 3.5% 3.4%
9:30am GBP Claimant Count Change 20.0k 27.0k
10:00am EUR German ZEW Economic Sentiment Survey 0.8 -3.6
2:15pm USD Industrial Production (m/m) 0.2% 0.0%
11:45pm NZD CPI (y/y - Q1) 1.7% 1.9%
11:45pm NZD CPI (q/q - Q1) 0.3% 0.1%