There's been a little bit of softness in the most recent job data with the unemployment rate ticking higher. For the month of August a reading of 3.9% marked a 0.1% increase on both the prior reading and the consensus forecast while the employment change showed quite a large drop (-56k vs +26k exp vs +31k prior). Wage growth also pulled back with average weekly earnings +3.8% 3M/Y vs +4.0% 3M/Y expected and the prior revised lower by 10 basis points to +3.9% 3M/Y.
Overall there is a hint of weakness here but it should be remembered that the labour market remains strong by historical standards. In terms of market reaction there was a small dip lower in the pound but it has since shrugged of the release with the markets far more concerned with the latest Brexit developments.
Barnier: Brexit deal "still possible"
Sterling has moved up near its recent highs against the Euro and US dollar this morning following more encouraging comments on the Brexit front. Michel Barnier has said that a new withdrawal deal is "still possible" this week with the caveat that it has become "more and more difficult" as we approach Thursday's key EU summit. Once more this is another example of the markets honing in on the positive aspects while looking through the negative, a recurring theme of late that has been a key driver behind the recent gains in the currency. There remains much to be done before a deal can even be brought back to be voted on by UK MPs, but the markets are clearly exhibiting a positive reaction function to the latest Brexit developments and that's good news for sterling bulls.
Separately Jacob Rees-Mogg has claimed that if a deal is agreed with the EU then it will pass through parliament, but these remarks should be taken with a pinch of salt considering that the terms of any deal remain unknown and as a staunch Brexit supporter he may be inclined to considerable bias.
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EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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