IFX Market Report: Wednesday 14th August 2019

UK jobs figures released yesterday morning surprised the markets and bucked the recent trend of poor data releases by coming out better than expected for the 3 months leading up to the end of June. Data showed 115,000 jobs were created, up on the forecast of 65,000 and took the level of employment up to a new all-time high of 32.811 million. Wage growth excluding bonuses rose to an 11-year high of 3.7%, up from 3.5% in May and with inflation sat at around 2.0% showed that real wage growth is moving in the right direction. The unemployment rate rose slightly to 3.9%, off the 44-year low of 3.8% seen in the previous period.

US National Security Adviser John Bolton and UK Chancellor of the Exchequer Sajid Javid are said to be discussing the possibility of a temporary partial trade deal between the US and UK which would take effect on November 1st, the day after the Brexit deadline. This could be signed off at the G7 summit in France later in the month. Despite the strong wage data, the pound remained close to multi year lows against both the US dollar and euro as investor remained cautious.

GBPUSD opened at 1.2046 and steadily rose to a high of 1.2091 by lunchtime, but as the afternoon continued the US dollar strengthened and pair closed at closed at 1.2066.

GBPEUR opened at 1.0769 and held steady in the morning before jumping sharply to a high of 1.0808 as moves in EURUSD drove the euro lower later in the session.

The US dollar rose in the afternoon as President Donald Trump appeared to spread a little festive cheer and announced he would be delaying a proposed tariff of 10% on Chinese imports due to come in to effect on September 1st until December 15th. The tariff covers mobile phones, laptops and other consumer goods, the delay is hoped to lessen the impact of tariff on US sales in the lead up to Christmas.

The dollar index rose sharply from a low of 97.37 by nearly 0.5% to a high of 97.82 as investors felt the news indicated light at the end of tunnel for US - China trade dispute.

Italian Deputy Prime Minister Matteo Salvini’s hopes of forcing an early general election hit a bump in the road as senators blocked an immediate no confidence vote against Salvini’s coalition partner Prime Minister Giuseppe Conte. Salvini’s popularity has soared in the 14 months since he came to power, his party is now polling 38% in the opinion polls and he was hoping to capitalise on this and force Conte out of office. The vote of no confidence will now take place on August 20th 2019.

EURUSD opened at 1.1188 and rose in the morning to a high of 1.1223, however news of Trump’s tariff delay sent the pair lower to close lower on the day at 1.1173.

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