Lots and lots of action in today’s morning London session, with the Greenback charging higher and the yen getting crushed underfoot.
Another noteworthy currency is the pound since it surged higher when the U.K.’s latest jobs report was released, only to find sellers waiting. However, bullish reinforcements later jumped in, sending the pound higher. The pound had no chance against the Greenback, though.
- U.K. jobless rate: steady at 4.3% as expected
- U.K. average earning (3m y/y): 2.2% vs. 2.1% expected, 2.1% previous
- Claimant count change in the U.K.: 1.7K vs. 1.3K expected, -0.2K previous
U.K. jobs report
We finally got our hands on the U.K.’s latest jobs report. And as expected, the jobless rate for the three months to August held steady at 4.3%, which is lowest reading since comparable records began in 1971.
However, the number of people claiming unemployment benefits increased by 1.7K in September, which is more than the expected 1.3K increase. Also, the previous month’s fall of 2.8K was revised to only shows a 0.2K decline, which is a real bummer.
Wage growth wasn’t too bad at least. For starters, nominal average weekly earnings (bonuses included) increased by 1.7% year-on-year in August, accelerating from the previous month’s 1.7% increase.
By the way, did I mention that the previous month’s reading was revised higher grom 1.4% to 1.7%?
Given the upgraded reading, the three-month average for the three months to July was revised higher fro, 2.1% to 2.2%.
The three-month average for the three months to August, meanwhile, came in at 2.2%, which is better than the consensus that it would come in at 2.1%.
Even better, if the 2.7% increase in bonuses is stripped, regular wages still increased by 2.2% year-on-year in August, which is a tick faster compared to the previous month’s 2.1%.
Unfortunately, total real earnings (inflation is taken into account) dropped by 0.5%, which marks the fifth month of negative real wage growth.
But on a more upbeat note, the drop in real earnings during the August period was softer compared to July’s 0.9% slide. And speaking of July’s reading, that was revised higher from the original estimate of a 1.2% drop, which is another piece of somewhat upbeat data.
Update on New Zealand politics
Before the morning London session rolled around, New Zealand First (NZF) Leader Winston Peters stated that he will be able to make “an announcement on the result of negotiations” between NZF, National, and Labour.
If Peters does announce who to back in order to form a government by tomorrow, then the political limbo in New Zealand will finally end.
Until then, however, political uncertainty holds sway. And it doesn’t help that a National Party spokesman said earlier that:
“We stress that we have had no indication of what decision New Zealand First will make.”
More risk-taking in Europe
Green was the color of the day in Europe, with the major European equity indices all in positive territory, which implies that appetite for risk was apparently in full swing.
And like yesterday’s morning London session, market analysts attributed the risk-on vibes to positive earnings results for European companies.
- The pan-European FTSEurofirst 300 was up by 0.37% to 1,540.89
- Germany’s DAX was still up by 0.48% to 13,057.75
- The blue-chip Euro Stoxx 50 was up by 0.29% to 3,624.50
Risk-taking in Europe also helped to keep U.S. equity futures supported throughout the morning London session.
- S&P 500 futures were up by 0.14% to 2,560.50
- Nasdaq futures were up by 0.08% to 6,128.38
Global bond yields rise
Another sign that risk-taking was the dominant sentiment during the morning London session was the broad-based rise in global bond yields.
- German 10-year bond yield up by 7.44% to 0.390%
- French 10-year bond yield up by 2.21% to 0.799%
- U.K. 10-year bond yield up by 2.58% to 1.310%
- U.S. 10-year bond yield up by 1.33% to 2.329%
- Canadian 10-year bond yield up by 0.64% to 2.029%
Major Market Mover(s):
The Greenback completely dominated its peers during the morning London session and is now the best-performing currency of the day (so far). Although the pound did try to fight back.
There were no direct catalysts for the Greenback’s surge, but some market analysts pointed to short covering by Greenback shorts because of higher U.S. bonds yields.
And the rise in U.S. bond yields, in turn, was attributed to higher expectations that Trump may be able to push through with his tax plans, as well as speculation that Trump may choose a more hawkish Fed Chair to replace Yellen.
Speaking of Yellen, short covering ahead of Trump and Yellen’s meeting later is also a possibility.
USD/JPY was up by 42 pips (+0.37%) to 112.82, USD/CHF was up by 30 pips (+0.31%) to 0.9825, USD/CAD was up by 22 pips (+0.18%) to 1.2529
The general appetite for risk and surging global bond yields presented a toxic environment for the safe-haven yen, so much so that the yen was the worst-performing currency of the morning London session.
The yen is also currently on course to finishing as the second weakest currency of the day (so far) after the Kiwi.
CHF/JPY was up by 10 pips (+0.10%) to 114.85, CAD/JPY was up by 19 pips (+0.21%) to 90.05, EUR/JPY was up by 40 pips (+0.30%) to 132.51
The pound jumped across the board when the U.K.’s latest jobs report was released since it revealed that the jobless rate held steady at record lows while wage growth came in better-than-expected.
Sellers were waiting to bushwhack the pound bulls, though, likely because sellers were more concerned that real wage growth was negative.
More bulls later joined the fray and sent the pound back up, however, likely because the BOE is still seen as on track for a rate hike, some market analysts say. The pound couldn’t recover against the Greenback, though.
GBP/CHF was up by 36 pips (+0.28%) to 1.2938, GBP/JPY was up by 52 pips (+0.35%) to 148.57, GBP/NZD was up by 39 pips (+0.27%) to 1.8479
Watch Out For:
- 12:30 pm GMT: Canadian manufacturing sales (-0.3% expected, -2.6% previous)
- 12:30 pm GMT: U.S. building permits (1.25M expected, 1.27M previous) and housing starts (1.18M expected, 1.18M previous)
- 2:15 pm GMT: ECB Board Member Benoît Coeuré is scheduled to speak
- 2:30 pm GMT: U.S. crude oil inventories (-4.7M expected, -2.7M previous)
- 6:00 pm GMT: U.S. Fed’s “Beige Book” is scheduled for release