The latest data on the UK labour market has come in slightly above forecast with the unemployment rate hitting a 42-year low and the average earnings index rising to 2.2% Y/Y compared to 2.1% previously. This increase in wages was not widely expected and similarly to Tuesday’s CPI reading could be deemed as positive for the pound. In fact sterling spiked higher immediately after the release, moving above the 1.32 handle against the US dollar but that initial move has since reversed.
Pound vulnerable despite more supportive data
The GBPUSD has since fallen to its lowest level of the day in the half hour following the data and a failure to rise on seemingly good news could be seen as an ominous signal. September’s incredible rally in the pound came after an above forecast inflation reading and a deliberate telegraphing from the BoE that a November rate hike was likely, but with these two now largely baked in, the scope for further upside surprises has diminished markedly. On the other hand, there is now further room to disappoint on the downside with a failure from Governor Carney and fellow MPC members to raise rates next month presenting a possible negative shock to the markets. As always with anything pound related the Brexit discussions has the potential for a major impact and with the current lack of progress, here there also seems to be greater scope for downside shocks.
Cryptocurrencies sell-off; Bitcoin drops 5%
There’s been some notable selling seen in cryptocurrencies this morning with a swathe of red seen across the board. Bitcoin is lower by around 5% on the day with a damning evaluation from UBS (NYSE:UBS) in which the market was called a “speculative bubble” a possible cause of weakness. Having said that, the fall comes after an incredible recent rise and it could simply be a case of some profit taking after the price had almost doubled from below $3000 to just shy of the $6000 mark in recent weeks. The UBS comments will attract headlines but they are unlikely to have much of an impact on investors views with ardent bulls ignoring previous warnings that were more dramatic in their language.