Trading conditions were relatively tight during the morning London session, likely because forex traders were bracing themselves for the FOMC statement (among a host of other top-tier events).
The pound was kind of an exception, though, since it jumped higher ahead of the U.K.’s latest jobs report, but encountered sellers that capped its gains when the U.K.’s jobs report was finally released.
The euro is also noteworthy since it had mixed and choppy price action like most of the other currencies, but began to find sellers after rumors about Italian politics began to make the rounds.
- German final HICP m/m: unchanged at 0.3% as expected
- German final HICP y/y: unchanged at 1.8% as expected
- U.K. jobless rate: steady at 4.3% vs. dip to 4.2% expected
- U.K. average earning (3m y/y): 2.5% as expected vs. 2.2% previous
- Claimant count change in the U.K.: 5.9K vs. 3.3K expected, 6.5K previous
- Euro Zone industrial production m/m: 0.2% vs. 0.0% expected, -0.6% previous
- U.S. CPI report coming up
- FOMC statement and presser later
- U.S. President Trump also expected to give a speech later
Tight trading conditions
Volatility was in short supply and the pound was arguably the only currency that showed clear and roughly uniform directional movement during today’s morning London session.
Trading conditions during the session were rather muted, likely because there are a lot of top-tier events are lined up for the upcoming U.S. session, including the final FOMC statment and presser of the year.
By the way, Forex Gump has a trading guide for that top-tier event, so click that link if you need a quick rundown on that.
Rumors on Italian politics
According to a Reuters news report that cited an unnamed “parliamentary source in contact with the president’s office,” Italian President Sergio Mattarella will supposedly dissolve Italy’s parliament “between Christmas and the New Year with national elections likely set for March 4.”
The Financial Times released a similar report at around the same time as the Reuters report, but cited La Repubblica and Corriere della Sera newspapers as their sources while also citing March 4 as the election date.
U.K. jobs report
We finally got our hands on the U.K.’s latest jobs report earlier. And contrary to expectations, the jobless rate for the three months to October was unchanged at 4.3% instead of ticking lower to 4.2%, which is a bit disappointing.
Even so, it’s worth pointing out that the 4.3% reading is still the shared lowest reading on record since comparable records began in 1971.
However, the number of people who claimed unemployment benefits increased by 5.9K in November, which is more than the consensus for a 3.3K increase. And to make matters worse, the previous reading was revised higher from a 1.1K increase to 6.5K.
The latest labor indicators seem rather disappointing so far, right?
Well, wage growth was relatively okay at least. Sure, total average weekly earnings only increased by 2.3% year-on-year in October, slowing down from the previous month’s 2.8% increase.
However, the three-month average still comes in at 2.5%, which is within expectations. Also, the slower wage growth was due to the drastically slower increase in bonuses (+1.3% vs. +19.7% previous).
If bonuses are stripped, then regular earnings rose by 2.4% in October, which is a tick faster compared to the previous month’s +2.3% and is the fastest annual wage growth in 10 months to boot. Moreover, the 2.4% increase in October is better than the BOE’s forecast of +2.2%, as laid out in the BOE’s November Inflation Report.
On a more slightly downbeat note, if inflation is taken into account to get real regular earnings, then wage growth continues to suffer since real regular earnings dipped by 0.4% year-on-year, which marks the ninth consecutive month of negative real wage growth, largely because of very strong inflation.
Skittishness in Europe
The major European equity indices were slightly in red during today’s morning London session.
And quite naturally, market analysts blamed the skittishness in Europe on jitters ahead of the upcoming FOMC statement and presser.
- The pan-European FTSEurofirst 300 was down by 0.15% to 1,540.68
- Germany’s DAX was down by 0.16% to 13,162.50
- The blue-chip Euro Stoxx 50 was down by 0.08% to 3,595.50
U.S. equity futures were also quite jittery and printing modest losses by the end of the session.
- S&P 500 futures were down by 0.08% to 2,665.50
- Nasdaq futures were down by 0.01% to 6,402.62
Major Market Mover(s):
The pound caught a bid ahead of the U.K.’s jobs report, likely because of preemptive positioning.
And when the jobs report was finally released, the pound was forced to give back some of its gains, likely because of profit-taking by pound bulls who opened preemptive positions or because the jobs report looked disappointing on the surface.
Dip demand was notable, though, so the pound was able to cling on to its gains and finished the session on a high note against all its forex rivals.
GBP/USD was up by 26 pips (+0.20%) to 1.3354, GBP/CHF was up by 37 pips (+0.29%) to 1.3248, GBP/CAD was up by 30 pips (+0.17%) to 1.7174
The euro didn’t stand out at first, but it became a bit more noticeable during the later half of the session when rumors about Italian politics apparently caused the euro to start sliding.
EUR/USD was up by 2 pips (+0.02%) to 1.1740 with 1.7544 as session high, EUR/JPY was down by 13 pips (-0.10%) to 133.02 with 133.28 as session high, EUR/GBP was down by 16 pips (-0.18%) to 0.8790 with 0.8821 as session high
Watch Out For:
- 1:30 pm GMT: Headline (0.4% expected, 0.1% previous) and core (0.2% expected, same as previous) readings for U.S. CPI
- 3:30 pm GMT: U.S. crude oil inventories (-3.6M expected, -5.6M previous)
- 7:00 pm GMT: FOMC monetary policy decision and statement; Fed is expected to raise target range for Funds Rates by 25 bps to 1.25% – 1.50%; Read Forex Gump’s trading guide to know more
- 7:30 pm GMT: FOMC presser
- U.S. President Trump expected to speak but no set schedule yet