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August 2016

UK data improves but Pound barely twitches

Published: Thursday 18 August 2016

  • UK data improves but Pound barely twitches
  • US Fed on hold awaiting more data
  • French unemployment improves
The Office for National Statistics says the average Briton has more disposable income now than at any time in history. That report comes a day after a report showing UK unemployment fell again in July and average earnings rose 2.4% in the year. Moody’s, the ratings agency, has said Britain will avoid recession and the global economy is stabilising and Markit reports that UK consumer sentiment is back up again. However, the fears that this could all turn sour remains at the back of most traders’ and investors’ minds and Sterling, which did recover a little on Tuesday night, remains rather subdued. USD 1.30 and EUR 1.15 appear to have some kind of magnetic pull for the Pound. If today’s UK retail sales data is positive, maybe we’ll get a little more Sterling strength. 
Yesterday brought us the minutes from the last Federal Reserve Open Market Committee meeting. The tone was much as we expected; a desire to see more evidence from the economy before making another interest rate hike. That probably means we will not see another hike this side of Christmas but there are two members who would prefer pre-emptive action. 
We had Australia’s unemployment report overnight and the headline levels were very positive with a decline in the unemployment rate to 5.7%. However, much is being made of the noticeable shift from full time to part time jobs but this report doesn’t put any pressure on the Reserve Bank of Australia to add further rate cuts to their plans. The Aussie Dollar is a little stronger this morning.
European data today includes the minutes from the last ECB meeting and Eurozone inflation data. It is unlikely either release will cause much drama for the Euro but we had positive French unemployment data 1st thing. Their unemployment rate dropped below 10% for the first time since mid-2012. At 9.9%, that is a positive for France but it does still look dire in comparison with the UK, US and others with unemployment rates around 5%.
And I need to go for a lie-down now. I am completely exhausted after watching the GB women beat New Zealand in the Hockey semi-final. You are probably the same. Talk about high-intensity. The fitness levels of those women is phenomenal. I am in awe.

 Job comparison

A mechanic is just finishing a major job on a vintage Bentley when the owner, a world-renown heart surgeon arrives to collect it.
“Doesn’t seem fair does it Doc”, says the mechanic. “You and me, well we are pretty much in the same business. See that Bentley of yours, well I took its heart apart, replaced all the valves, reconstructed it and now it is running like a Swiss watch. You and me; we’re the same but I earn £40,000 and year and you are probably on ten times that much…maybe more.”
The surgeon looks into the engine bay, smiles and turns to the mechanic. “But can you do it while the engine is running?” 

Today's Major Economic Releases 

Market BST Data/Event Previous Expected
GBP 09:30 UK: Retail sales m/m -0.9% 1.4%
EUR 10:00 EU: Final CPI y/y 0.2% 0.2%
EUR 10:00 EU: Final core CPI y/y 0.9% 0.9%
EUR 12:30 ECB monetary policy meeting accounts    
USD 13:30 US: Philly Fed manufacturing index -2.9 1.4
USD 13:30 US: Unemployment claims 266k 269k
USD 15:00 FOMC member Dudley speaks    

FX Research by David Johnson

Daily Currency Analysis with Charlie Horsley

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