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August 2016

Sterling rebounds ahead of unemployment data

Published: Wednesday 17 August 2016

  • Sterling rebounds ahead of unemployment data
  • Fed divided over rate hikes? – minutes released today
  • NZ employment data improves
British cycling is in rude health. Watching Jason Kenny and his fiancé Laura Trott setting fresh medal-haul records last night was an awesome sight but knowing that every single member of the GB cycling squad in Rio has won a medal of some colour; well that’s an incredible achievement.  
 
Comments from the President of the New York Federal Reserve that a September interest rate hike is possible caused the US Dollar to stabilise and the price of gold to slip. However, the markets aren’t really buying that hawkish tone; investors seem to agree that the pressure on the global economy will keep the Fed on the back foot for now. They may push the US base rate up by 25 basis points this year but it seems hardly likely. We will get the minutes from the last Fed meeting later today, so that should shed some light on the matter.
 
We had strong New Zealand employment data overnight. A rise in employment of 2.4% and a fall in the unemployment rate from 5.2% to 5.1% have, understandably strengthened the New Zealand Dollar in early trade.
 
We had a positive report from Moody’s, the credit rating agency, that showed UK banks are in a much better position to withstand a property market correction than they were prior to the 2007/08 collapse. Traders will turn their eyes to UK employment data this morning. This is expected to be quite upbeat and, if you have tried to recruit anyone in your business, you will agree. The upshot of this positive view is that the Pound rebounded yesterday from a very low base. Nonetheless, it is encouraging to see that there are profit takers and GBP buyers below the USD 1.30 level and the EUR 1.15 level. 
 
And the Rio games has generated some odd stories, including a colour-morphing pool but there is a story doing the rounds that one of the kayakers capsized because he struck a submerged sofa. As you can imagine, there has been a lot of fun made of this story but one tweet made me laugh. It read, ‘DFS, official sponsors of Rio 2016’.   That’s funny but let’s remember, if it is from DFS, someone somewhere is still covering the monthly payments but at least they got it in a sale.
 

Logic

 
A family sat to eat and before anyone could say Grace as usual, 8-year-old Billy just steamed into his food with gusto.

“Billy, wait. We have to say Grace,” said his mum.

“It’s not necessary,” said Billy with a mouth full of roast beef.

“But we always say a prayer before we eat at home,” said his mum.

“Yup,” said Billy, “But that was our house. We are safe here. Grandma knows how to cook.”
 

Today's Major Economic Releases 

 
Market BST Data/Event Previous Expected
GBP 09:30 UK: Average earnings index 3m/y 2.3% 2.5%
GBP 09:30 UK: Claimant count change 0.4k 5.2k
GBP 09:30 UK: Unemployment rate 4.9% 4.9%
USD 15:30 US: Crude oil inventories 1.1m 0.3m
USD 18:00 FOMC member Bullard speaks    
USD 19:00 FOMC meeting minutes    

FX Research by David Johnson

Daily Currency Analysis with Joe De Berniere



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