Sterling under pressure after disappointing labour data

Enrique Díaz-Álvarez13/Aug/2015Currency Updates


Sterling was put under pressure on Wednesday following the release of the latest labour report from the Office for National Statistics. The currency depreciated against the Euro by 0.6% to a one month low, although rallied versus the Dollar to finish 0.4% higher.

Yesterday’s much anticipated labour report in the UK mostly disappointed expectations. As was widely expected, average earnings excluding bonus came in unchanged at 2.8% in the three months to June. However, including bonus’, the reading was far more underwhelming, dropping to a three month low 2.4%. In terms of employment, the UK jobless rate remained unchanged at 5.6%, although the number of those in unemployment rose in absolute terms, increasing by 25,000 to 1.85 million. This marked the first time in two years that the jobless total has risen in two consecutive months, after also increasing in March.

Such figures are likely to dispel any expectations for an interest rate hike in the UK in 2015, especially considering last week’s rather dovish monetary policy minutes. However, the numbers are still relatively strong, and are consistent with a Bank of England rate hike around February time next year.

A lack of any major data points at all in the UK on Thursday and Friday means that attention among traders in the UK will turn to retail sales in the US this afternoon and next week’s inflation figures.


A very strong day’s trading for the Euro on the back of a broadly weaker Dollar and continued optimism surrounding Greece, culminated in the single currency ending the London session 1% higher versus the US Dollar.

There was further disappointing industrial production data in the Eurozone released yesterday. Output in the industrial sector once again disappointed expectations for the third consecutive month, declining by 0.4% on a month previous in June. This led to an expansion of just 1.2% on an annualised basis, well down on the 1.5% that had been forecast according to Eurostat. Factory output fell across the board, declining in Germany, France and Italy, with only a modest increase in Spain. The figure increases concerns that Friday’s growth figure will disappoint, with the Eurozone looking set to fail to register even a modest 2% growth this year.

Inflation figures for Germany are due before markets open in the UK this morning. However, market focus will be on the ECB’s monetary policy meeting accounts, set for release in the Eurozone just after midday.


The US Dollar tanked by 0.9% against its basket of currencies yesterday as a second devaluation of the Chinese Yuan in two days cast doubt among traders as to whether the Federal Reserve would hike in September.

However, speaking yesterday afternoon, New York Federal Reserve President William Dudley made some rather hawkish comments by claiming that he was “hopeful” that a rate lift-off would take place in the near future. Speaking in Rochester, New York, Dudley echoed recent comments from policymakers by claiming any move would be data dependent. Critically, he spoke about the topic of China, claiming that while the Fed was keeping tabs on the country, it was not panicking, and instead focusing more on a growth perspective than an FX one. This implies that the country’s recent devaluation will likely not deter the Fed from tightening monetary policy in September.

In terms of economic indicator data, the latest JOLTS job openings disappointed expectations, falling from 5.357 million to 5.249 million. Meanwhile, mortgage applications remained effectively unchanged, rising by just 0.1%.

The biggest data point of today comes in the form of retail figures in the US at 1.30pm London time. Market expectation is in the region of between 0.4% and 0.7%. A bounce in line with this consensus will no doubt support a September interest rate hike by the Fed.

Rest of the world

Dragged down by China’s devaluation, the Malaysian Ringgit, Singapore Dollar and Indonesian Rupiah all touched fresh multi-year lows against the Dollar. Meanwhile, the Russian Ruble slid to a six month trough despite central bank reassurance on the Yuan’s impact.


Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.