Headline UK unemployment rate increased to 4.1% from 3.9%, in line with expectations. Early estimates suggested the number of employees on payrolls was 695,000 lower than March with a 74,000 increase in the monthly claimant count.
Markets continue to monitor EU/UK trade developments as further concerns grow over deteriorating conditions. Reports that the EU are delaying their decision on whether to grant EU access for UK-based Euro clearing houses next year, reinforces fears of economic damage once the UK leaves the transition period.
The House of Commons debated the Internal Markets Bill as Prime Minister Johnson defended the legislation and stated that some EU demands were unreasonable and against the spirit of the Northern Ireland protocol. Sterling pushed to highs around 1.2920 before fading against the Dollar as underlying sentiment remained negative. Against the Euro, The pound again, initially pushed up to 1.0869 before falling again to 1.08.
The UK government won the Internal Markets Bill second reading vote in the House of Commons with a majority of 77 with detailed discussions pencilled in over the coming days. There is still a high level of opposition to the bill with markets monitoring developments closely as Sterling reaction proving limited.
The dollar lost ground amid the more confident mood in global equity markets, especially with increased merger activity.
There were also expectations that the Federal Reserve (Fed) would adopt a dovish tone at this week’s policy meeting and strengthen forward guidance to reinforce market expectations that rates will be left at extremely low levels for a longer period. Expectations of very low yields continued to undermine dollar support.
There will be further caution ahead of Wednesday’s Fed policy decision with risk trends important for the US currency.
Euro-zone industrial production increased 4.1% for July, marginally above consensus forecasts, with the year-on-year decline slowing to 7.7% from 12.0%.
ECB chief economist Philip Lane has stated that there is no indication that the bank is hitting the lower bound in rates. There were, however, further doubts whether the central bank would be able to cut interest rates further, especially with negative rates already undermining the banking sector with Irish central bank Governor Makhlouf additionally stating a back up plan would be wise on the basis of no UK-EU trade deal. The Euro continues to be hampered somewhat by unease over Brexit trade tensions.
The Euro has the 1.19 in sight against the Dollar but was unable to make the charge higher . Instead drifting slightly lower as the greenback managed to regain some ground. As of writing the Euro trades just above the 1.1880 against its US counterpart.
Data to watch
07:00 - GBP - Claimant Count Change
Posted in Daily Market News on Sep 15 2020