Trading conditions tightened a bit during the morning London session, probably because traders are waiting for the BOC statement and Fed Head Yellen’s testimony.
Still, there was enough price action to keep the session lively since the pound was in recovery mode, thanks to a net positive jobs report. The Loonie, meanwhile, was in retreat, even though oil was surging higher.
- Chinese new yuan loans: 1,540B vs. 1,258B expected, 1,110B previous
- U.K. average earnings index: 1.8% as expected vs. 2.1% previous
- U.K. jobless rate: 4.5% vs. steady at 4.6% expected
- Claimant count change in the U.K.: 6.0K vs. 10.5K expected, 7.5K previous
- Euro Zone industrial production m/m: 1.3% vs. 1.0% expected, 0.3% previous
- BOC rate decision and presser later
- Fed Chair Yellen will also testify later
Net positive U.K. jobs report
The Office for National Statistics (ONS) released the U.K.’s latest jobs report earlier.
And according to the ONS, the jobless rate ticked lower to 4.5% in the three months to May. This is a new record low since comparable records began in 1975. Moreover, the consensus was that it would hold steady at 4.6%. Even better, the downtick in the jobless rate appears to be a healthy one since the employment rate actually rose from 74.8% to 74.9%, a record high since 1971.
As for the number of people claiming unemployment benefits in June, ONS reported a 6.0K increase, which isn’t as bad as the 10.5K increase. Also, the increase in June was weaker compared to the 7.5K increase back in May. And did I mention that the reading for June was a four-month low?
Moving on to wage growth, nominal average weekly earnings (bonuses included) increased by 1.8% year-on-year in May, with a three-month average of 1.8%.
The three-month average is a drastic slowdown compared to the 2.1% posted in April. Still, the slower 1.8% increase is within expectations so it isn’t too disappointing.
And besides, the year-on-year reading of 1.8% is faster than +1.3% reported in April. Also, April’s reading was actually slightly upgraded from 1.2% to 1.3%.
What’s even better is that wages grew at a faster pace, even as bonuses slumped by 7.2% year-on-year, since nominal wages stripped of bonuses rose by 2.3% (1.8% previous), which is the fastest in six months.
The only downbeat thing about wages is that real earnings (inflation is taken into account) continue to take hits, with real average weekly earnings (bonuses included) falling by 0.9%.
But on a more upbeat note, the 0.9% fall in real earnings in May is a bit softer compared to the 1.3% slump recorded in April.
After getting whupped for the past couple of days, commodities managed to stage a broad-based recovery during today’s morning London session.
Precious metals printed some gains.
- Gold was up by 0.15% to $1,216.48 per troy ounce
- Silver was up by 0.29% to $15.790 per troy ounce
Base metals were mixed but most were in positive territory.
- Copper was up by 0.56% to $2.687 per pound
- Nickel was up by 0.60% to $9,232.50 per dry metric ton
Oil benchmarks very clearly outperformed.
- U.S. WTI crude oil was up by 1.53% to $45.73 per barrel
- Brent crude oil was up by 1.28% to $48.13 per barrel
The commodities recovery was driven by data showing a faster-than-expected pick up in Chinese loans issued to both consumers and business, market analysts say.
As for oil’s strong performance, that was attributed to earlier reports stating that Saudi Arabia supposedly plans to slash its August oil exports by around 600,000 barrels per day to 6.6 million barrels per day, which would be the lowest this year.
Risk appetite returns
Risk sentiment apparently flipped back to risk-on during today’s morning London session since European equity indices were on the green for the day.
- The pan-European FTSEurofirst 300 was up by 0.86% to 1,503.43
- Germany’s DAX was up by 0.16% to 12,520.75
- The blue-chip Euro Stoxx 50 was up by 0.75% to 3,489.50
The risk-on mood also gave U.S. equity futures a bullish boost.
- S&P 500 futures were up by 0.16% to 2,428.38
- Nasdaq futures were up by 0.30% to 5,737.12Market analysts attribute the risk-on vibes to the commodities rally, which boosted energy and mining shares, as well as upbeat revenue reports for retailers, which drove up demand for retail companies.
Major Market Mover(s):
The pound finally found some respite during today’s morning London session. And pound bulls can thank the U.K.’s net positive jobs report for that. Heck, the pound was even the best-performing currency of the morning London session.
GBP/USD was up by 58 pips (+0.46%) to 1.2878, GBP/CAD was up by 108 pips (+0.65%) to 1.6656, GBP/NZD was up by 79 pips (+0.45%) to 1.7793
The Loonie was the worst-performing currency of the session, even though oil was in rally mode at the time. No clear reason why, but it’s highly likely that some Loonie bulls were taking some profits off the table ahead of the BOC statement later.
USD/CAD was up by 25 pips (+0.20%) to 1.2933, EUR/CAD was up by 23 pips (+0.15%) to 1.4813, AUD/CAD was up by 25 pips (+0.26%) to 0.9896
Watch Out For:
- 2:00 pm GMT: BOC rate decision and statement (rate hike from 0.50% to 0.75% expected); read Forex Gump’s write-up on that here
- 2:00 pm GMT: Fed Chair Yellen will testify before the House Financial Services Committee
- 2:30 pm GMT: U.S. crude oil inventories (-3.2M expected, -6.3M previous)
- 3:15 pm GMT: BOC press conference on monetary policy decision
- 6:00 pm GMT: U.S. Fed’s “Beige Book” will be released