Market Drivers October 16, 2018
UK Wages grow fastest since 2009
EU – Brexit deal harder than expected
Nikkei 1.25% Dax 0.2%
Europe and Asia:
GBP UK Wages 2.7% vs. 2.6%
GBP UK Claimant Count 18.5 vs. 7.5
EUR ZEW 70.1 vs. 74.5
Price action was subdued in Asian and early European trade today, but both cable and euro backed off the session highs as Brexit concerns weighed across the board.
In UK the latest numbers from the labor data were generally positive with average wages climbing to 2.7% from 2.6% eyed – the highest since 2009. Unemployment remained at 4% but the Claimant Count climbed to 18.5K from 10.0K expected. That was the highest level since May suggesting that demand may be starting to slow.
Cable popped to 1.3200 but backed off on fears that no Brexit will be reached tomorrow at the EU summit. European authorities continued to make hopeful comments, but the sticking points over the customs union and Irish border issue continue to dog the talks.
Meanwhile, the threat of Brexit is souring sentiment in Germany too, where ZEW printed lower at 70.1 versus 74 eyed. German exporters continue to be concerned that lack of a Brexit deal could produce chaos in one of its largest local export markets and the lack of clarity continues to weigh on producers in the region.
Still despite with last-minute posturing, risk appetite improved with Nikke rising more than 1% which helped to lift USDJPY above the 112.00 figure. In US, the calendar is barren but the focus will now turn to earnings and if earnings beat to the upside, sentiment could improve further carrying the pair back to 112.50. However, given the fragile state of affairs after last week’s massive sell-off, any disappointment in earnings or guidance could rupture the calm in the markets and send equities and USDJPY to fresh swing lows on fears that growth has peaked.