Article Highlights

  • French final HICP m/m: 0.2% vs. unchanged at 0.1% expected
  • French final HICP y/y: unchanged at 1.4% as expected
  • Swiss PPI m/m: -0.2% vs. 0.4% expected, 0.4% previous
  • U.K. jobless rate: 4.7% vs. steady at 4.8% expected
  • Claimant count change in the U.K.: -11.3K vs. -5.0K expected, -41.4K previous
  • U.K. average earning index (no bonus): 2.3% vs. 2.4% expected, 2.6% as previous
  • U.K. average earning index (w/ bonus): 2.2% vs. 2.4% expected, 2.6% previous
  • U.S. CPI and retail sales reports coming up
  • FOMC rate statement and presser later
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Today was another relatively subdued morning London session, probably because forex traders are bracing themselves for the upcoming FOMC statement. The pound was clearly on the move, though, apparently because of the disappointing jobs report.

Major Events/Reports:

Wage growth in the U.K. disappoints – The U.K. Office for National Statistics (ONS) released the latest jobs report earlier. And it was revealed that the jobless rate improved from 4.8% to 4.7% in the three months to January, which is great.

Even better, the latest reading is the lowest since the July-September 2005 reporting period. The employment rate, meanwhile, held steady at 74.6%, the highest reading since comparable records began in 1971. In addition, the number of people claiming unemployment benefits fell by 11.3K in February, more than the expected 5K fall.

So far, so good, right? Well, the readings for wage growth were unfortunately rather disappointing. To begin with, nominal average weekly earnings (bonuses included) grew by 1.7% year-on-year in January, with a three-month average of 2.2%. This is the weakest year-on-year increase since February 2016. Moreover, the three-month average was expected to come in at +2.4%. And did I mention that the three-month average is the poorest reading since the three months to April?

The slower wage growth was partially due to bonuses contracting by 2.7% after already contracting by 3.9% previously. Although the deceleration in regular earnings growth (bonuses excluded) was also a factor for the slowdown in wage growth. Nominal average weekly earnings that have been stripped of bonuses only grew by 1.9% in January. This is the slowest reading since March 2016, as well as marking the third month of weaker readings. The weaker reading is also why the three-month average dipped to +2.3% from +2.6%, which is the poorest reading since August 2016.

This disappointing wage growth is even more glaringly obvious in real terms (inflation is taken into account). Real average weekly earnings (including bonuses) fell by 0.2% year-on-year in January (+0.3% previous), which is the first negative reading since August 2014. This means that the purchasing power of the average Brit suddenly contracted, which will likely hurt consumer spending and GDP growth somewhere down the road.

Dutch voting underway – People in the Netherlands are going to the polls and casting their ballots in the nation’s parliamentary elections. It’s still too early for preliminary results to come out, but this event may be worth watching since this is the first of three elections in continental Europe this year. And some market analysts are saying that the results of the Dutch elections is a sort of barometer for anti-EU and anti-immigrant sentiment in the Euro Zone.

FOMC decision day today – The FOMC will be deciding whether or not to hike the Federal Funds Rate today, so market players are on their toes. And as a result, volatility and directional movement was relatively more limited than usual. By the way, if you’re planning to trade that event, you may wanna read up on Forex Gump’s write-up for that here.

Major Market Mover(s):

GBP – The pound surged before the London session rolled around for no apparent reason. The pound then spent the session by weakening across the board, apparently weighed down by the U.K.’s poor wage growth numbers.

Going back to the earlier spike, there was no apparent reason, as I mentioned earlier. However, a Reuters report, citing its own study and a study by the Wall Street Journal, noted that the pound has a pattern of moving ahead of major economic reports, such as today’s jobs report. And there’s speculation that the pound’s moves are linked to leaks.

Reuters also pointed out that: “Around a dozen journalists from news agencies including Reuters have access to the data around 40 minutes ahead of publication. However, they are only given the information in a locked room without Internet or phone access and under the supervision of ONS staff.” Kinda mysterious where them leaks are coming from, assuming there really are leaks of course.

GBP/USD jumped 78 pips before the session opened, but was down by 29 pips (-0.24%) to 1.2193 for the session, GBP/JPY jumped 81 pips before the session opened, but was down by 45 pips (-0.33%) to 139.74 for the session, GBP/CHF jumped 73 pips before the session opened, but was down by 22 pips (-0.18%) to 1.2301 for the session

Watch Out For:

  • 12:30 pm GMT: Headline (0.0% expected, 0.6% previous) and core (0.2% expected, 0.3% previous) readings for U.S. CPI will be released
  • 12:30 pm GMT: Headline (0.2% expected, 0.4% previous) and core (0.1% expected, 0.8% previous) readings for U.S. retail sales will be released
  • 12:30 pm GMT: U.S. Empire State manufacturing survey (15.3 expected, 18.7 previous)
  • 2:00 pm GMT: NAHB U.S. housing market index (steady at 65 expected)
  • 2:30 pm GMT: U.S. crude oil inventories (3.3M expected, 8.2M previous)
  • 6:00 pm GMT: FOMC rate decision and statement (target range for Fed Funds Rate expected to be raised from 0.50%-0.75% to 0.75%-1.00%)
  • 6:30 pm GMT: FOMC press conference
  • 9:45 pm GMT: New Zealand’s GDP (0.7% expected, 1.1% previous)

See also:

Asian Session Recap 
U.S. Session Recap

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