Market Drivers April 17, 2015

Cable retakes 1.5000 despite mediocre labor data
EZ CPI shows no improvement
Nikkei -1.17% Europe -0.17%
Oil $56/bbl
Gold $1204/oz.

Europe and Asia:
GBP UK Claimant Count -20K vs. -29K
GBP UK Unemployment rate 5.6% vs. 5.6%
GBP Average Wage Gains 1.7% vs. 1.8%
EUR EZ CPI 0.6% vs. 0.6%

North America:
CAD Retail Sales 8:30 AM

USD U of M 9:55 AM

Cable rose through the 1.5000 level for the first time in more than a month despite mediocre UK labor data that nevertheless showed mild but steady improvement in employment conditions.

UK jobless claimant count fell by another -20K, but this was less than -29K forecast by the market. The unemployment rate remained steady at 5.6% while average wage earnings slightly missed the 1.8% anticipated rise coming in at 1.7%.

Overall, the UK economy continues to show steady progress with unemployment rate now the lowest since the pre-2008 credit crisis as labor conditions remain far better than on the Continent. Although the data didn’t quite match the market expectations, it was good enough to provide relief for traders concerned about the UK election coming up in early May.

Cable has been under relentless pressure over the past month on political rather than economic concerns as fears have risen that the Torries may lose their grip on power allowing much less market friendly Labor government to take over. However the latest labor data should provide a small boost to Torries as it shows that the recovery remains on track. If the polling data confirms that thesis, cable could see stronger gains ahead.

Meanwhile in EZ the CPI data printed in line at 0.6% showing no improvement in the overall price levels but at least the deflationary pressures have eased. EUR/USD ran through the 1.0800 figure and remains steady at that level.

Much of the gains in the majors over the past several days have been driven by a sharp shift to anti-dollar sentiment. US data has seen a series of disappointing results since the start of the month diminishing the prospect of any rate hike normalization by the Fed in the near future.

Today’s calendar carries CPI and U of M data with market expecting little change from the month prior. Having sold off for most of the week the dollar could see a short covering rally if the inflation readings post hotter than expected. However, if the news continues to miss consensus forecast, the dollar could see another wave of selling with USD/JPY breaking below the key 118.50 support and cable extending its run towards 1.5100 figure as the day proceeds.

Leave a Comment

Hide me
Receive Thought Provoking Forex Commentary Directly to Your Inbox
Show me