17/08/2017 - UK Jobless Rate at Lowest Level Since 1975

GBP

The Pound strengthened yesterday morning after the latest data from the Office for National Statistics revealed average weekly earnings grew by 2.1% year on year, easing the cost of living in the UK. The data showed that the squeeze on real incomes continues to grow at a slower pace than before. 

Consumer prices rose by 2.6% over the same month so there remains some divergence (-0.5%) between the price and wages growth which economists believe will likely continue weighing on British households’ purchasing power. There is some cause for optimism that the squeeze on household finances could come to an end later this year. Analysts do not believe the figures make an imminent UK interest rate rise any more likely, however the surprise growth in UK wages was seen as positive for the Pound.

The jobless rate fell to 4.4% which is its lowest since 1975 after unemployment in the UK fell by 57,000 in the three months to June. At 75.1%, the proportion of people in work is the highest it has been since 1971. The falling jobless rate was caused by an uptick in the construction, accommodation and food services sectors and transport and storage industries.

EUR

The Euro-zone received more positive news after their headline GDP figure increased 0.6% in second quarter after France and Italy join upswing led by Germany and Spain. After years of unprecedented stimulus the euro-area economy gathered pace in the second quarter revealing the upswing is finally starting to spread across the 19-nation region. 

Exports and investment have led France to its strongest continuous expansion since 2011 and the Netherlands posted the fastest growth since the end of 2007. Italy, which has lagged the pickup of its peers, is starting to shake off its reputation as the sick man of Europe with an increase in gross domestic product that may top 1 percent this year for the first time since 2010.

USD

The divide appeared in minutes released from the Federal Open Market Committee's July meeting, when central bank policymakers voted to hold the target rate to a range of 1 percent to 1.25 percent.

Some voting participants expressed "concern about the recent decline in inflation" and said the Fed "could afford to be patient under current circumstances." and that They "argued against additional adjustments" until the central bank was sure that inflation was on track.

On the other side, more hawkish members "worried about risks arising from a labor market that had already reached full employment and was projected to tighten further." Reluctant to see a steady diet of rate hikes that could cause the Fed to overshoot its employment target and cause financial instability, they said.

Key Announcements

GBP – 09:30:  Retail Sales is expected to fall to 0.2%

USD – 13:30 : Unemployment Claims is expected to fall to 240k