UK unemployment rate down to 4.3%

UK employment rose by 160,000 to a higher level than in February 2020 (before covid) in September, bringing the unemployment rate down to 4.3%; the best since September 2020. That gave the Pound a boost this morning after hints from the Bank of England that higher interest rates are on their way. So the GBPEUR rate whizzed up from €1.1710 to €1.1830 in the last 24 hours and the Pound has made headway elsewhere but there are other factors in play in those other exchange rates.

In that same 24 hour period, the GBPAUD rate shot up by a full cent to AUD 1.8340 but it has slipped a little since that high. The minutes of the last Reserve Bank of Australia meeting showed a lot of caution. It is unlikely Aussie interest rates will rise in 2022, according to Governor Philip Lowe. They appear happy to let the spike in inflation run its course before pulling the trigger on that.

The GBPNZD rate saw an equally impressive spike but that stalled at NZD 1.9145. A big part of that decline in the value of the Australasian Dollars is the market nervousness ahead of this afternoon’s US retail sales data. We will get global dairy price data later today and that is always influential as far as the NZD is concerned.

The rationale for that is that this data will show whether US demand is resilient enough despite rising inflation. If it is, then the US Federal Reserve is better placed to raise interest rates. That should boost the USD and investors would tend to drop other currencies to invest in US assets. There are lots of caveats in that but markets still work on the principle of ‘buy the rumour, sell the fact’.

Markets calmed by Sino-US talks

One caveat that may affect whether the Fed is quick to act is that the US president may announce his pick for Federal Reserve chair very soon. A reappointment of Jerome Powell would support the more hawkish tendency but he may choose economist, Lael Brainard who is perceived to be more dovish. If she were appointed, the US Dollar would weaken, initially at least. There has been some gain in confidence that the global economy may recovery due to the talks between the US and China. Whether anything will come from that is another matter but at least the two massive, nuclear-capable countries are talking.

In the here and now, the EURUSD rate is still on a downward path that has dropped to a low of $1.1370; not seen since July 2020. There is a strong chance this will test $1.13 today. If that breaks, $1.1175 is a sensible target. However, if this morning’s Eurozone GDP data shows the currency sharing bloc’s economy grew by more than 3.7% in the year to September, we will see a bit of a bounce.

So, after a quiet start to Monday, things are much livelier today. I cleaned my fridge out yesterday, as instructed by the interweb. Quick question, if the ham has a sell-by date of June 2020, it’s probably still OK, isn’t it? It’s cured after all. If not, it’s international fast-food day. How very timely.

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