CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

UK Labour report fails to impress the pound

Article By: ,  Senior Market Analyst
May 15, 2018 11:47 AM

The FTSE climbed higher across most of today’s session supported by a weaker pound, following a mixed labour report and the house builders following promise of a higher dividend by Taylor Wimpey.

The pound was unimpressed by the UK labour report despite their being several points to cheer. 

The unemployment rate remains at a multi decade low of 4.2% as expected, whilst the closely watched average wage growth figure was also in line with expectations, increasing by 2.9% in the three months to March, up marginally from 2.8% the previous month. 

Given that inflation in March was 2.5%, wage growth at 2.9% was greater. This is good news for the economy as it means that domestic inflation should start to creep higher, potentially keeping a BoE interest rate rise still on the table later in the year.

Despite in line wage growth and unemployment, investors were shaken by an increase in the number of people seeking the unemployment benefit. 

The claimant count rose by 31.2k against just 7.8k forecast, a significant increase, so much so that it changed the tone of the report to a distinctly negative one in the eyes of the market. 

Rising claimant counts is a negative signal for the future labour market, signalling a possible loosening of the market going forward rather than a tightening that the BoE is seeking to revive optimism of a rate hike.

The pound initially pushed higher before falling heavily as invested digested the higher claimant numbers vs in line wages growth. Sterling is trading back below $1.35 at fresh 4-month lows underlining just how sensitive sterling is at the moment to this labour report. 

Just last month slightly weaker than forecast wage growth triggered the 900 points sell off in the pound from $1.4370 to $1.3460. 

Whilst another sell off of this magnitude is extremely unlikely, I think it’s safe to say that the pound will be languishing here for a while, particularly given that there is no more high impacting UK data this week to pick the pound up from these levels.

US 10 year yields hit 3.05%

The dollar was notably stronger on Tuesday after retail sales hit expectations at 0.3% month on month and treasury yields climbed to 3.05%, the highest level since 2011. 

Higher yields whilst supporting the dollar unnerved investors, pushing US equity indices lower on the open. 

The Dow dropped 200 points in early trade with demand dampened by higher yields, reflecting higher interest rate expectations, which is not such good news for corporate borrowing.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024