After a fantastic run of form sterling stumbled over a wages-shaped obstacle this Wednesday.
While the unemployment rate unexpectedly dipped to a fresh 42 year low of 4.3%, and the claimant count change beat forecasts at -2.8k, those figures don’t really matter at the moment. No, the main focus of the UK jobs report remains the average earnings index, and will do as long as inflation keeps climbing. For the quarter ending in July wages grew by just 2.1%, failing to jump to 2.3% as expected and languishing half a percent below July’s 2.6% CPI reading (which, remember, then rose to 2.9% in August).
The pound didn’t take the news well, reversing its early growth against the dollar and euro – which had left it at one year and 6 week highs respectively – to fall 0.3% against both. That’s because the data arguably carries a dovish hue – though raising rates would in theory help curb inflation, the Bank of England likely won’t want to put any more pressure on already struggling households.
While sterling’s slide took the edge off the FTSE’s losses it couldn’t fully lift it out of the red. Instead the index is still down 30 or so points, weighed down by its mining stocks. As for the eurozone, the euro’s bounce against the pound meant there was little for the DAX and CAC to enjoy, instead both indices sitting flat as the morning went on.
Looking to this afternoon and for now the Dow Jones seems to have stalled at 22100. The index is set to start the US session flat at that level, with little on the agenda – bar the latest PPI reading – to help it on its way to a fresh all-time high.
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