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The pound had a promising start but got kicked broadly lower after the U.K.’s latest jobs report showed some disappointing readings for wage growth.

Meanwhile, the euro and the Swissy parted ways after Erdogan spoke, since the euro was pummeled by sellers while the Swissy found enough buyers to outpace the yen.

  • German preliminary GDP q/q: 0.5% vs. 0.4% expected, 0.3% previous
  • German final HICP y/y: unchanged at 2.1% as expected
  • French final HICP y/y: unchanged at 2.6% as expected
  • Spanish final HICP y/y: unchanged at 2.3% as expected
  • Swiss PPI m/m: 0.1% vs. 0.3% expected, 0.2% previous
  • U.K. jobless rate: 4.0% vs. steady at 4.2% expected
  • U.K. average earning (3m y/y): 2.4% vs. 2.5% expected, same as previous
  • Claimant count change in the U.K.: 6.2K vs. 2.3K expected, 7.8K previous
  • Euro Zone preliminary GDP q/q: 0.4% vs. 0.3% expected, same as previous
  • German ZEW economic sentiment: -13.7 vs. -21.3 expected, -24.7 previous
  • Euro Zone industrial production m/m: -0.7% vs. -0.3% expected, 1.4% previous
  • Euro Zone ZEW economic sentiment: -11.1 vs. -16.4 expected, -18.7 previous
  • NFIB U.S. small business index: 107.9 vs. 106.9 expected, 107.2 previous

Major Events/Reports:

Erdogan speaks

Turkish President Recep Tayyip Erdogan had some press time earlier, and he lashed out against U.S. sanctions when he said that:

“We will boycott US electronic products … If they have iPhone, the other side has Samsung. In our country there is Venus, Vestel.”

He also accused the U.S. of economic warfare when he said that:

“They do not refrain from using the economy as a weapon against us, as they tried in the areas of diplomacy, military, or efforts for social and political instability.”

Other than that, Erdogan also expressed that he’s optimistic that the Turkish Lira will stabilize and reassured listeners that Turkish banks haven’t gone bankrupt.

However, Erdogan’s comments do imply that Turkey won’t release Brunson, a U.S. pastor, from prison. And that implies, in turn, that U.S. sanctions likely won’t be going away for some time.

Hunt speaks

British Foreign Secretary Jeremy Hunt spoke to reporters late into the session. And he warned that:

“Everyone needs to prepare for the possibility of a chaotic no-deal Brexit.”

“I think the risk of a no Brexit deal has been increasing recently.”

U.K. jobs report

The U.K.’s latest jobs report was released earlier during the session. And it revelealed that the jobless rate in the three months to June fell from 4.2% to 4.0%, which is the best reading “since December 1974 to February 1975.”

The improved reading is also a welcome surprise since the market was expecting the reading to hold steady at 4.2%.

Sadly, the number of people who claimed unemployment benefits rose by 6.2K in July, which is more than the +2.3K consensus.

As for wage growth, average weekly earnings only grew by 2.1% year-on-year in June, which is the worst reading since July 2017. And the three-month average comes in at 2.4%, missing expectations that it would hold steady at 2.5%.

On a slightly happier note, the weaker headline reading in June was due to the 6.6% slump in bonuses paid. If bonuses are stripped to get regular earnings, then average weekly earnings actually increased by 2.8%, which is a three-month high.

But on another downbeat note, real wage growth (inflation is taken into account) fell by 0.1% year-on-year in June, which the first negative reading in seven months.

Fading appetite for risk in Europe

Most of the major European equity indices opened higher and then climbed to fresh intraday highs as the session progressed. However, signs of risk aversion began to show up later since the major European equity indices steadily pared their gains.

Market analysts attributed the earlier risk-on vibes to positive earnings reports and the recovery in the Turkish Lira, which eased Turkey-related jitters and allowed European banking shares to recover.

As to why appetite for risk appeared to fade during the later part of the session, it’s not very clear yet.

However, financial shares pared a large chunk of their gains after Erdoğan spoke, so the fading appetite for risk may be due to returning Turkey-related jitters.

  • The pan-European FTSEurofirst 300 is still up by 0.10% to 1,507.41 but off the intraday high at 1,515.10,
  • Germany’s DAX is still up by 0.11% to 12,371.72 but off the intraday high at 12,460.90,
  • The blue-chip Euro Stoxx 50 is still up by 0.07% to 3,415.95 but off the intraday high at 3,435.75

Major Market Mover(s):

GBP

The pound started the session on a strong footing, but reversed course and ended up as the worst-performing currency of the session after the U.K.’s latest jobs report was released, likely because wage growth failed to impress.

GBP/USD was down by 26 pips (-0.21%) to 1.2770, GBP/CAD was down by 48 pips (-0.29%) to 1.6706, GBP/JPY was down by 52 pips (-0.37%) to 141.58

EUR

The euro barely eked out a win against the pound and was the second worst-performing currency of the morning London session.

The euro encountered sellers relatively early in the session. And the apparent catalyst appears to be Erdogan’s defiant comments, which likely renewed fears of a potential contagion.

EUR/USD was down by 18 pips (-0.16%) to 1.1406, EUR/CAD was down by 35 pips (-0.24%) to 1.4922, EUR/JPY was down by 40 pips (-0.32%) to 126.45

CHF

The Swissy outpaced the yen to claim the top spot during the morning London session. And the Swissy can probably thank Erdogan for that since Erdogan’s comments appear to be the reason for the returning risk-off vibes in Europe.

USD/CHF was down by 23 pips (-0.24%) to 0.9905, EUR/CHF was down by 44 pips (-0.39%) to 1.1298, GBP/CHF was down by 56 pips (-0.44%) to 1.2649

Watch Out For:

  • 12:30 pm GMT: U.S. import prices (0.1% expected, -0.4% previous)