Pound edges up on UK data
The main currency pairs treaded water yesterday in generally quiet markets. Sterling has edged a little higher this morning following the release of slightly firmer than expected labour market data in the UK, to around $1.28 against the dollar and 85.4p versus the euro (it has now gained almost a penny from last week’s lows against the single currency). The euro is little changed against the dollar, trading at about $1.0930.
Equity markets ended broadly flat yesterday, though overnight the Nikkei Index in Japan advanced by 3.5% which is spilling over into a positive open for European stocks this morning. In government bond markets, yields nudged down for a second session in a row led by US 10-year yields, which fell by around 5bps. Meanwhile, oil prices have risen, with Brent crude moving above $80 p/b yesterday, amid reports of an anticipated retaliatory attack by Iran on Israel.
Employment in the UK posted a small increase in the second quarter, up 0.3% (or 97k) from Q1, according to this morning’s data, though there was a surprise fall in the unemployment rate to 4.2% (from 4.3% in Q1). Private sector earnings growth – which the Bank of England is closely monitoring as an indicator of inflation persistence in the economy – slowed further in Q2, to 5.2% year-on-year from 5.9% in first quarter (and down from a peak of just over 8% in mid-2023).
The New York Fed’s latest survey of US consumers inflation expectations will reassure monetary policy-makers. It showed a decline in 3-year ahead inflation expectations to the lowest level – 2.3% in July – since the series began in 2013, while expected earnings growth over the next year also declined last month, to 2.7% from 2.4% in June, perhaps an indication of softening labour market but also probably reflecting the recent decline in actual inflation.
Today sees the release of producer prices (PPI) data in the US, ahead of the key consumer prices (CPI) report tomorrow, with the consensus expecting both headline and core PPI prices to have risen by 0.2% in the month of July (a stronger or weaker outturn than this could elicit a reaction in markets). Other data due includes the small business optimism index in the US and the ZEW Index of investor sentiment in Germany.