The pound caught a bid from the get-go and then attracted even more buyers after the U.K.’s jobs report painted a positive picture for wage growth.
The euro, meanwhile, was slapped lower at the start of the session, thanks to Italian PM Conte’s speech. However, buying pressure returned later, likely because of the Greenback’s weakness.
The euro wasn’t the second top-performing currency of the session, however, since that honor goes to the Kiwi, very likely because of the risk-friendly vibes and the Greenback’s weakness, although optimism because of New Zealand’s stronger-than-expected CPI reading may still be feeding demand for the Kiwi.
Speaking of the Greenback, the buck was the worst-performing currency of the session, probably because U.S. bond yields came off their highs during the session.
- German import prices (m/m): 0.0% as expected vs. -0.2% previous
- U.K. jobless rate: steady at 4.0% as expected
- U.K. average earning (3m y/y): 2.7% vs. 2.6% expected, same as previous
- Claimant count change in the U.K.: 18.5K vs. 4.5K expected, 14.2K previous
- Euro Zone trade balance: €16.6B vs. €14.7B expected, €12.6B previous
- Euro Zone ZEW economic sentiment: -19.4 vs. -9.1 expected, -7.2 previous
- German ZEW economic sentiment: -24.7 vs. -12.0 expected, -10.6 previous
U.K. jobs report
The U.K.’s latest jobs report was released earlier during the session. And it revealed that the jobless rate in the three months to August held steady at 4.0% as expected. This is the shared best reading “since December 1974 to February 1975.”
Sadly, the number of people who claimed unemployment benefits rose by 18.5K in September, which is more than the +4.5K consensus.
As for wage growth, average weekly earnings only grew by 2.9% year-on-year in August, which is slower compared to the 3.3% increase recorded back in July.
However, the three-month average still comes in at 2.7%, beating expectations for a 2.6% increase.
Also, the slowdown was due mainly to bonuses falling by 1.3% year-on-year (+2.8% previous). If only regular earnings are considered, then wages grew by 3.1%, which is only a tick slower compared to the previous +3.2%, and also happens to be the second highest reading since July 2015.
Even better, real wage growth (inflation is taken into account) increased by 0.6% year-on-year in August (+0.9% previous), so wage growth is beating inflation and has been doing so in 8 of the last 9 months. Also, the three-month average for real wage growth comes in at +0.4%, which is the best reading since January 2017.
Italy successfully approved its budget and sent it to the E.U. for approval yesterday.
And today, there were rumblings that Italy and the E.U. may be headed for a conflict.
And it didn’t help that Italian PM Conte openly rejected austerity when he said the following in a speech earlier (emphasis mine):
“Italy’s a founding EU member and a net contributor. On the strength of this position, we go to Brussels with an budget that we are proud of and that we want to discuss without prejudices.”
“Austerity is a path that can no longer be taken. It is fundamentally important for our country to reduce the growth gap with the (rest of the) EU.”
On the E.U.’s side of the fence, European Commission President Jean-Claude Juncker appears to have unofficially rejected Italy’s budget since Juncker had this to say about Italy’s budget:
“If we accepted the slip, some European countries would cover us with insults and tirades with the accusation we are being too flexible with Italy.”
Risk-friendly vibes in Europe
Risk-taking was the name of the game in Europe since the major European equity indices were broadly in the green.
And according to market analysts, the risk-friendly vibes in Europe were due to expectations that earnings season will yield very good results.
- The pan-European FTSEurofirst 300 was up by 0.50% to 1,419.92
- Germany’s DAX was up by 0.40% to 11,659.67
- The blue-chip Euro Stoxx 50 was up by 0.34% to 3,222.65
U.S. bonds yields ease
U.S. bond yields climbed higher during the earlier session. They then hit fresh intraday highs when the morning London session rolled around. However, U.S. bond yields steadily tumbled lower after that and closed out the session in the red. They’re still broadly in the green for the day, though.
- U.S. 30-year bond yield down by 0.09% to 3.348% after reaching an intraday high of 3.358%
- U.S. 10-year bond yield down by 0.10% to 3.170% after reaching an intraday high of 3.180%
- U.S. 5-year bond yield down by 0.01% to 3.029% after reaching an intraday high of 3.036%
- U.S. 2-year bond yield down by 0.15% to 2.868% after reaching an intraday high of 2.878%
Major Market Mover(s):
The pound was one currency to rule them all during the session and is also currently the top-performing of the day.
The pound’s rise was partially due to the U.K. positive jobs report, but the pound was already moving higher before the jobs report was even released. And according to market analysts, that was due to short-covering and/or preemptive positioning ahead of the E.U. Summit.
Speaking of the E.U. Summit, you may wanna read up on Forex Gump’s What to Expect from the EU Summit This Week.
GBP/USD was up by 61 pips (+0.47%) to 1.3226, GBP/CHF was up by 46 pips (+0.37%) to 1.3059, GBP/JPY was up by 60 pips (+0.41%) to 148.19
A weaker U.S. dollar and the risk-friendly vibes allowed the Kiwi to extend its gains and claim the second top spot of the morning London session.
NZD/USD was up by 18 pips (+0.28%) to 0.6582, NZD/CHF was up by 12 pips (+0.18%) to 0.6499, NZD/JPY was up by 17 pips (+0.23%) to 73.74
The Greenback was down in the dumps during the morning London session, probably because U.S. bond yields came of their highs.
USD/JPY was down by 7 pips (-0.06%) to 112.03, USD/CHF was down by 10 pips (-0.10%) to 0.9874, USD/CAD was down by 34 pips (-0.26%) to 1.2957
Watch Out For:
- 12:30 pm GMT: Canada’s foreign security purchases ($10.05B expected vs. $12.65B previous)
- 1:15 pm GMT: BOE MPC Member Jon Cunliffe will testify before the Treasury Committee
- 1:15 pm GMT: U.S. industrial production (0.2% expected vs. 0.4% previous) and capacity utilization rate (78.2% expected vs. 78.1% previous)
- 2:00 pm GMT: U.S. JOLTS job openings (6.90M expected vs. 6.94M previous)
- 2:00 pm GMT: NAHB U.S. housing market index (68 expected vs. 67 previous)
- 8:15 pm GMT: San Francisco Fed President Mary Daly is scheduled to speak
- 9:20 pm GMT: RBA Assistant Governor Guy Debelle will speak
- Dairy auction currently underway (-1.9% previous); auction usually ends at around 2:00 pm GMT