Home Daily Commentaries UK jobs data breeds concern

UK jobs data breeds concern

Daily Currency Update

UK jobs data has been released earlier this morning. Employment Change of -66K figures for June, compared to the expected 50K. The Unemployment Rate in the UK increased to 4.2% over the three months through June which came in higher than the expected 4%. On the other hand, average earnings exceeded expectations at 8.2% compared to the anticipated 7.3%. The strong wage data has increased bets that the Bank of England could need to continue to tighten its policy, which has seen a jump in Sterling versus the USD and EUR. Bubbling under the surface is the risk of stagflation with inflation remaining high, unemployment figures increasing, and a potential slowing in economic growth, which would have a negative impact on the Pound long term. GBP/USD broke 1.2710 on the news after being as low as 1.2630 during yesterday's session. GBP/EUR briefly touched 1.1640, but now trades at the overnight highs of 1.1620.

It is a French and Italian bank holiday today, but German ZEW economic sentiment is due at 10 am. US retail sales and manufacturing are this afternoon. This is ahead of the latest CPI news from the UK tomorrow morning (7 am) and FOMC meeting minutes from the US in the afternoon. These are the key releases for the week, and we expect volatility in the run-up to the announcements and to follow them.

Key Movers

China cut its 1-year loans to financial institutions by 15 basis points overnight, the largest since the COVID pandemic. Industrial output and retail sales growth both slowed from a month earlier to a year-on-year pace of 3.7% and 2.5% respectively, missing expectations. The news was another round of disappointing data from China and market participants don’t believe the recent interest rate cut will do much to stop the downward spiral the Chinese economy faces. The local Yuan dropped to its lowest in just over 9 months with state-owned banks stepping into the spot market to steady the currency. GBP/CNY sits over 9.24 and USD/CNY is over 7.28. The data from China overshadowed that of Japan who saw tourism and car exports sent annualised growth surging to 6% in the second quarter, well above the 3.1% analysts had expected.

Expected Ranges

  • GBP/USD: 1.2630 - 1.2740 ▼
  • GBP/EUR: 1.1580 - 1.1660 ▲
  • GBP/AUD: 1.9490 - 1.9760 ▲
  • EUR/USD: 1.0880 - 1.0980 ▼