- The pound is a little higher this morning, with GBPUSD trading above 1.28 after data released earlier showed that the UK’s unemployment rate unexpectedly fell. The jobless rate in the three months through June fell to 4.2% from 4.4% – lower than the 4.5% that markets were expecting. A separate release showed that regular wage growth cooled to 5.4%, down from 5.8% in the previous period and the weakest year-on-year pay increase since the summer of 2022. Markets and BoE officials will be paying close attention to this and further data releases in the coming days ahead of the next MPC policy meeting on September 19th. Current betting suggests that officials will hold rates unchanged after rate setters cut by 25bp at their recent meeting with a November reduction remaining on the cards.
- Middle East tensions are weighing on market sentiment with the dollar gaining along with gold and oil prices over concerns about a possible Iran attack on Israel. In a largely quiet start the week, the dollar index gained a little despite treasury yields falling a touch. Ahead of today’s PPI release the New York Fed’s survey of consumer expectations showed inflation expectations falling, with three-year period hitting the lowest mark since the survey’s inception in 2013.
- The single currency continues to consolidate above 1.09 as markets await the release of the German ZEW survey. The German economy remains in a vulnerable position after its economy unexpectedly shrank in the second quarter even as other euro area countries expanded. The ZEW survey is the first significant data release of the month for the bloc and will be monitored for clues on the timing of the next interest rate cut from the ECB.
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