Cable given a timely boost after better than expected UK employment figures announced

Claire Hogarth16/Oct/2014Currency Updates

GBP

After one of its worst days trading in the past few weeks on Tuesday, Sterling was able to strengthen by 0.2% on the Dollar yesterday after some encouraging data was released in the UK.

The level of UK unemployment fell below two million for the first time in almost six years in August as the UK labour market continued its improvement in 2014. This led to the National Statistics ILO Unemployment rate falling to its lowest level since December 2008 at 6%, a noticeable improvement on July’s 6.2% reading. The employment rate reached 73%, close to an all-time high of 73.2%, with Chancellor George Osborne claiming that the fall in unemployment was evidence of the effectiveness of the government’s long term plan. While the Claimant Count change came in worse than expected, the figure, which represents the change in the number of unemployed people in the UK, showed an 18,600 decrease.

EUR

The single currency rose for the sixth day in the past week against the Pound, appreciating by 0.85% and reaching its strongest position against the UK currency in almost five weeks. The Euro has now climbed a staggering 3.2% on Sterling and 1.6% on greenback since the start of October.

A quiet data day for the Eurozone with the only release of any note the Consumer Price Index figures for Germany which met expectations and remained constant at 0.8% YoY in September and remained stationary MoM for the second month in a row. ECB President Draghi made a couple of low key appearances during the day but traders failed to gain any insight into the ongoing thought processes of the ECB, with the market reaction muted as a result.

Today sees the announcement of the September Consumer Price Index and August’s Trade Balance for the Eurozone at 10am.

USD

A very bad day for the greenback as a host of data announcements came in below expectations yesterday causing the US Dollar Index to initially plummet, before regaining some ground to finish trading 0.9% down. Greenback also declined to its weakest position versus the Yen in five weeks after falling 1.1%.

The most notable release of the day was the Retail Sales for September that registered its first MoM decline since February at -0.3%. The data, which measures the change in total receipts of all retail stores in the US, was below last month’s 0.6%, and less than economists predicted value of -0.1%. To compound further misery on the Dollar, the Retail Sales data excluding autos for September also registered a surprise 0.2% decline, despite predictions of a slight increase.

The Produce Price Index, a measure of the average changes in prices of US commodity producers, also fell both YoY from 1.8% in August to just 1.6% in September and MoM, from stable to -0.1% it was announced in early afternoon trading. These unpredicted dismal figures sent the US Dollar Index into free fall as it declines by 1.7% in little over one hour. A slight recovery in the afternoon, however, as the monthly Budget Statement for September came in above expectations at $106 billion.

More volatility in the Dollar expected today with a number of further economic announcements. At 1:30pm London time jobless claims data will be announced for October followed by the Fed’s Industrial Production change at 2:15pm.

Rest of the world

The Canadian Dollar strengthened on greenback over the course of the day but remains weak after falling 0.45% during morning trading and hitting a five year low on the USD amid changes in the price of oil. Prices for crude oil dropped to dangerously low levels as dimming prospects for global demand and surging oil supply pushed the price for the international benchmark of crude oil to less than $85 a barrel, its lowest level in four years.

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Written by Claire Hogarth

Marketing Executive at Ebury. English Literature graduate from the University of York and a motivated professional.