Wage growth and unemployment rate surprises lift sterling
The UK jobs report was full of pleasant surprises this Wednesday, helping shake the pound out of its early slumber.
While still below June’s corresponding 2.6% inflation reading, the latest average earnings index data easily outstripped estimates, coming in at 2.1% (both including and excluding bonuses). That wasn’t all: the claimant count change figure fell to -4.2k, the best reading in 5 months, while the unemployment rate hit a fresh 42 year low of 4.4%.
Of course one could argue about the quality of jobs being creating, and highlight the fact that despite beating forecasts real wages are nevertheless being squeezed. However, theses nuances didn’t seem to bother sterling; instead the currency focused on the headline positives, rising 0.1% against the dollar and 0.4% against the euro. Unusually this didn’t deter the FTSE, which continued to push ahead with a 0.6%, 7400-crossing climb.
Over in the Eurozone the DAX and CAC only saw their gains increase, the German and French indices surging by 0.8% and 1.1% respectively. That’s because the euro has taken a bit of a hit this Wednesday, its losses against the pound joined by a 0.2% dip against the dollar. This despite the Eurozone’s annualised GDP reading for Q2 being revised from 2.1% to 2.2% (the quarterly figure remained unchanged at 0.6%).
As for this afternoon, there isn’t much on offer bar the US building permits and housing starts, leaving the Dow Jones to face a mild 35 point rise when the bell rings on Wall Street. The main focus for the US this Wednesday is the evening’s Fed meeting minutes, with investors hoping for a bit more clarity on what ‘relatively soon’ means in regards to the central bank shrinking its balance sheet.