UK Unemployment Gives Sterling A Boost

15 October, 2015

Simon Eastman

Wednesday we saw some light relief for the ailing pound following the release of the unemployment figures. The consensus was for unemployment to stay the same as last month but in fact it dropped by 10 basis points coming in at 5.4 percent rather than 5.5 percent.

Despite the rest of the UK data coming out under forecast the pound still rallied. Average earnings dropped more than expected whilst those claiming benefit for job seekers rose  by 4600, which was in stark contrast to the expected 2100 drop. These figures gave the pound the legs to rally against the euro, helped by the EU industrial production stat coming in lower than expectations. Over the day the pound gained a cent against the single currency, most welcome compared to recent days by those looking to buy in the eurozone. 

With the US dollar being on the back foot since traders put back expectations for an interest rate rise to March next year, the dollar has been under pressure and yesterday was no different. We had a raft of data releases from across the pond, most notable was retail sales. Markets expected an increase from the flat 0 percent from August but with the hope of 0.2 percent, came disappointment in the shape of a mere 0.1 percent increase. Bad news for the US economy, bad news for any interest rate hike and ultimately bad for the greenback as it lost 2 cents to the pound and a cent to the euro.

Over night the Aussie strengthened by a cent and a half, but failed to hold its gains after the release of their jobs data, with unemployment rate expected to come out at 6.3 percent, from 6.2 percent last month but in fact held at the lower rate. In addition the employment change was forecast to drop from 17,000 to 5,000 but in fact came out at negative 5,100 hence the fact the Aussie dropped back again almost straight away.

Today is quiet on the markets until after lunch when we get some key US eco stats in the shape of their core inflation figures. This is a key indicator of how the economy is fairing and will give more credence to when interest rates will be looked at.  Any drop in the figure, although not expected, will cause the dollar further losses and could well see the euro gain if the currency see saw comes back into play. With little else to go on, traders will be focussing strongly on this data but could well see the pound suffer this morning if profits are taken from yesterday’s gains.

Overnight, anyone with a Kiwi dollar requirement should bear in mind we have the release of inflation figures which are expected to drop.  Any change to this could lead to some volatility so it could be worth placing a limit order and stop loss to protect yourself, or of course, fixing the rate today before the figures released.

Anyone with a non US dollar requirement could be well placed to trade this morning rather than leave it to later in the day. Just give one of the CI team a call to discuss your options.