Exposure Of European Banks To Turkey Troubles Euro

EUR

The euro recovered on Tuesday from earlier losses linked to the collapse of the Turkish lira, but investors said the exposure of European banks to Turkey would continue to trouble the single currency.

The lira has lost more than 40 percent of its value against the dollar this year, hit by worries over President Tayyip Erdogan’s calls for lower interest rates and fraying ties with the United States.

The currency was supported by news of a planned conference call in which the finance minister would seek to reassure investors concerned by Erdogan’s control of the economy.

Investors remain nervous about the plunge in the lira, prompting capital outflows from other emerging markets that run hefty current account deficits and rely on foreign capital.

GBP

UK unemployment fell by 65,000 to 1.36 million in three months to June – the lowest for more than 40 years, official figures from the Office for National Statistics (ONS) show. They also show a rise in productivity, but a slowdown in wage growth. Wages, excluding bonuses, grew by 2.7% in the three months to June, compared with a year ago. The ONS figures also showed the number of European Union nationals working in the UK fell by a record amount.

The fall was the largest annual amount since records began in 1997. It UK unemployment at lowest since 1975 continues a trend seen since the 2016 Brexit vote. That contrasted with a rise in the number of non-EU nationals working in the UK to 1.27 million – 74,000 more than a year earlier.

The unemployment rate fell to 4% in the quarter to June. That was the lowest since February 1975 and better than the figure expected by economists. The drop came despite a smaller-than-expected 42,000 increase in the number of jobs created over the three-month period.

On productivity, the ONS also said output per hour worked was up by 1.5% – the biggest rise since late 2016.

The official figures also showed 104,000 people who were employed on “zero-hours” contracts, which do not guarantee a set number of hours per week, left such work. That left 780,000 people with those conditions as their main job.

It also said the number of people aged 16 to 64 who were not working, looking for work or available to work – what is known as “economically inactive” – increased by 77,000 from the first quarter of the year.

Key Announcements

09.30 – GBP: CPI YoY; Forecast at 2.5% against previous of 2.4%
13.30 – USD: Core Retail Sales MoM; Forecast the same as previous at 0.4%
13.30 – USD: Retail Sales MoM; Forecast at 0.2% against previous of 0.5%