Lots of themes were playing out during the session, but the most notable one is the pound’s strength ahead of and after the U.K.’s latest jobs report.
Other noteworthy themes include the Greenback’s weakness ahead of the FOMC statement, as well as lack of love for the Aussie and Kiwi.
- U.K. jobless rate: 4.3% vs. steady at 4.4% expected
- U.K. average earning (3m y/y): 2.8% vs. 2.6% expected, 2.7% previous
- Claimant count change in the U.K.: 9.2K vs. -3.1K expected, -1.6K previous
- CBI’s U.K. industrial order expectations: 4 vs. 9 expected, 10 previous
- FOMC monetary policy statement and presser later
- RBNZ monetary policy statement also later
Net positive U.K. jobs report
The U.K.’s latest jobs report was released earlier. And it revealed that the jobless rate ticked back down from 4.4% to the shared record low of 4.3% in the three months to January.
Sadly, the number of people who claimed unemployment benefits saw a 9.2K increase in February. This is contrary to expectations that we’ll see a 3.1K decline.
Another sad note is that average weekly earnings only increased by 2.8% year-on-year in January, slowing down from +3.2%.
But on a happier note, the three-month average comes in at 2.8%, which is the highest reading since September 2015 and is better than the expected 2.6% rolling average.
Yet another upbeat note is that the weaker increase in average weekly earnings was due to bonus pay getting slashed from +10.6% to +3.9%.
If bonuses are stripped to get regular earnings, then average earnings grew by 2.8% year-on-year, which is the best reading since July 2015.
Better still, real wage growth (inflation is taken into account) comes in at +0.1% year-on-year. This is the first uptick in real wage growth after 11 consecutive months of declines.
Overall, the U.K.’s latest jobs report was mixed but positive overall, thanks in particular to the first increase in real wages after 11 consecutive months of declines.
Commodities broadly recover
Commodities were in recovery mode today after taking a beating yesterday.
And the broad-based commodities recovery was likely due to bargain-buying after yesterday’s slide, as well as the Greenback’s recent weakness.
And for reference, the U.S. dollar index was down by 0.28% to 89.76 for the day when the session ended.
Base metals were actually mixed, but many were in positive territory.
- Lead was up by 0.85% to $2,371.50 per dry metric ton
- Zinc was up by 0.78% to $3,227.00 per dry metric ton
Precious metals also bounced back. It probably helped that risk aversion prevailed in Europe.
- Gold was up by 0.23% to $1,314.90 per troy ounce
- Silver was up by 0.40% to $16.250 per troy ounce
As mentioned earlier, oil benchmarks were doing rather well.
- U.S. WTI crude oil was up by 0.99% to $64.17 per barrel
- Brent crude oil was up by 1.04% to $68.12 per barrel
Risk aversion in Europe
The European equity indices had a mixed start but it later became apparent that risk aversion was the prevailing sentiment in Europe since most of the European equity indices were in the red by the end of the morning London session.
And quite naturally, market analysts were quick to blame the risk-off vibes on skittishness ahead of the FOMC statement amid expectations that the Fed will announce a rate hike.
- The pan-European FTSEurofirst 300 was down by 0.24% to 1,465.44
- Germany’s DAX was down by 0.10% to 12,295.36
- The blue-chip Euro Stoxx 50 was down by 0.30% to 3,403.00
U.S. equity futures were also feeling the heat.
- S&P 500 futures were down by 0.13% to 2,720.00
- Nasdaq futures were down by 0.39% to 6,890.50
Major Market Mover(s):
The pound was the one currency to rule them all during the morning London session, thanks to the U.K.’s net positive jobs report. Although it should be noted that the pound already caught a bid before the jobs report was released. And that was likely due to preemptive positioning on the hopes that the U.K.’s latest jobs report will impress.
GBP/USD was up by 22 pips (+0.16%) to 1.4048, GBP/NZD was up by 85 pips (+0.44%) to 1.9626, GBP/AUD was up by 83 pips (+0.45%) to 1.8297
The Greenback extended its losses from earlier and was one of the worst-performing currencies of the morning London session.
There was no direct catalyst for the Greenback’s continued weakness, but it’s highly likely that we’re just seeing some profit-taking by dollar bulls, as well as preemptive positioning ahead of the FOMC statement.
USD/JPY was down by 7 pips (-0.06%) to 106.25, USD/CHF was down by 13 pips (-0.13%) to 0.9537, USD/CAD was down by 18 pips (-0.13%) to 1.3014
AUD & NZD
The Greenback was weak during the morning London session, but the Aussie and the Kiwi were even weaker. In fact, they were the only currencies that lost ground to the faltering Greenback.
As for catalysts, there weren’t any direct catalysts. However, it’s highly likely that the two higher-yielding currencies were hit by the risk-off vibes.
Another likely reason is interest rate differentials since the Fed is widely expected to hike later.
NZD/USD was down by 18 pips (-0.26%) to 0.7157, NZD/JPY was down by 24 pips (-0.32%) to 76.06, NZD/CHF was down by 27 pips (-0.39%) to 0.6826
AUD/USD was down by 23 pips (-0.30%) to 0.7677, AUD/JPY was down by 29 pips (-0.36%) to 81.58, AUD/CHF was down by 31 pips (-0.43%) to 0.7322
Watch Out For:
- 12:30 pm GMT: U.S. current account (-$125B expected, -$101B previous)
- 2:00 pm GMT: The SNB’s quarterly bulletin
- 2:00 pm GMT: U.S. existing home sales (5.40M expected, 5.38M previous)
- 2:30 pm GMT: U.S. crude oil inventories (2.6M expected, 5.0M previous)
- 6:00 pm GMT: FOMC monetary policy decision and statement (Fed expected to raise Fed Funds Rate target range by 25 bps)
- 6:30 pm GMT: FOMC presser
- 8:00 pm GMT: RBNZ monetary policy decision and statement (OCR steady at 1.75% expected)