The latest employment data has shown continued strength in the UK labour market with the unemployment rate falling to 4.6% - the lowest level since 1975. The claimant count change also dropped and although there was an upward revision to the prior reading on balance the overall picture is a strong one.
One aspect that may temper the report on an individual level is that whilst average earnings rose slightly, due to the faster increase in the pace of inflation real wages have have fallen at their fastest pace in over two and a half years. The market reaction has been fairly muted despite all three aspects seemingly supportive of sterling, with the pound not making any substantial gains against the US dollar despite some Trump-induced weakness in the buck.
Comey memo put more pressure on Trump
Reports last night of a leaked memo from former FBI director James Comey on a meeting with Donald Trump have caused quite a shock in Washington and there’s been a notable reaction in the markets. Safe haven assets such as gold and the Japanese yen have seen some buying since the revelations were announced with the memo apparently stating that Trump had encouraged Comey to not thoroughly scrutinise fired aid Michael Flynn’s role in the ongoing investigation into Russia’s efforts to influence the 2016 campaign.
Whilst this memo is yet to be confirmed it is another unwanted development for Trump who has come under increasing scrutiny in the past week or so as the Russia story refuses to go away. Trump has always maintained his innocence relating to any untoward contact with the Kremlin and whilst the official investigation remains ongoing, the handling of the latest developments is arguably causing the greater concern.
White House not singing from the same hymn sheet
The White House seem incapable of even sticking to the same coherent story in the past week and the mishandling of this is raising serious questions about the ability of Trump and his administration to govern effectively. Even if the Russia investigation returns a verdict which showed no wrongdoing on Trump’s behalf, his actions in the handling of it have provided more ammunition for those who believe he is unsuitable for the role and that a lack of experience in holding high-level public office will hinder his performance. Whilst we have seen a reaction in gold, the Japanese yen and the US dollar (with a trade weighted index of the greenback falling to a seven-month low yesterday) the moves are still relatively small in nature and Wall Street is still expected to open not far from record levels this afternoon.
With the conclusion of the Russia investigation seemingly still some way off, Trump would be wise to attempt to go at least a day without any more negative press and should perhaps refrain from sticking his head above the parapet once more and adding to problems that are largely avoidable and his own in the making. However, Trump has shown little by the way of restraint since his unexpected victory in November and it would maybe be less surprising if upon awakening in the coming hours he takes to Twitter and adds more fuel to the recent fires that are threatening to rage out of control.
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