UK Unemployment hits 42 year low

The main figures yesterday were from the UK with the latest unemployment rate and average earnings. Unemployment in the UK fell by 57,000 in the last quarter bringing the jobless rate down to just 4.4%, its lowest level since 1975 and better than the predicted hold at 4.5%. Average earnings also increased slightly from 2% to 2.1% but wage growth remains much lower than the current inflation level of 2.6% and so the real squeeze on people pockets is yet to ease. These better figures were a much needed boost for the pound although gains were extremely limited with only half a cent improvement against the Euro, and all gains against the US Dollar were eradicated by close of business.

Eurozone GDP was announced shortly after with another strong figure of 2.2%, an increase from 2.1% previously and a higher figure than the 1.7% growth seen in the UK currently. GBP/EUR buyers should consider that the recent drop in rates is not all about the Pound, and in fact is even more about the strength of the Euro, something that is expected to be a long term trend going into next year.

The day was rounded off last night with the latest FOMC minutes from the US and these minutes provided a mixed view from the FED on the timing of the next rate hike. Members were split on their opinions towards inflation with the growth rate taking a surprise dip last month, leading some indecision as to whether the currently forecasted December hike may be delayed into 2018. Despite the split December remains the most likely timing of the next US hike unless inflation drops further in the coming months.

Yesterday’s unemployment data was the first piece of good news all month for the Pound and even this has had little effect on the exchange rates. This morning we have UK Retail Sales figures at 9:30am with markets expecting a drop from 2.9% to just 1.4% growth annually, and the trend of Retail Sales has been a worsening one in recent months. At 10am the latest inflation figure for the Euro-zone will also be announced. After today there are no key announcements for the UK until September, so anyone holding out for an improvement in rates over the next few weeks may wish to reconsider their approach as without any fundamental boosts from data, Sterling exchange rates will most likely continue to trade sideways and lower with a continuation of the current trend. If you are concerned about the current negative trend, speak to your account manager today about our Forward Contracts where you can guarantee your rate for up to 2 years with just a 10% deposit.