Sterling Recovers from 2-Month Low

Daily Analysis - 25/08/2017

UK Economic Data Offers Little Cheer For Policymakers

The British pound is mounting a weak pullback from a two-month low against the US dollar as the UK economic outlook remains clouded by impending “Brexit” risks. On a monthly basis, the Sterling is on track to log its biggest fall since October of last year.

British Growth Slows As Consumption Tumbles

After expanding by 0.20% during the first three months of the year, the UK Office for National Statistics confirmed Thursday that the economy experienced second quarter expansion of 0.30% in its second estimate of gross domestic product for the period.

Meanwhile, a separate report published by the Confederation of British Industry showed that retail sales growth slowed in August by the fastest rate in over a year. The UK had last year surprised most economists by managing to grow in the six months following the June vote to leave the European Union, with increased activity largely the function of strong consumer spending.

However, Thursday’s numbers showed household spending is flattening, reigniting investor concerns about the economic outlook.

GBPUSD touched a two-month low of 1.2770 on Thursday before rebounding back above 1.2800 overnight.

US Jobless Claims Rebound from 6-Month Low

The number of people in the United States who applied for unemployment benefits edged up by 2,000 to 234,000 during the week ended August 19^th according to data released late on Thursday.

Economists surveyed by MarketWatch had forecast claims for state benefits to rise to 238,000 after hitting a six-month trough of 232,000 just a week prior. Last week’s figures were the lowest since February and marked the second lowest level since the current phase of economic expansion started back in 2009.

The longer-term trend also witnessed improvement, with the four-week average of fresh claims dipping 2,750 to 237,750. The four-week data smoothens sharp fluctuations in the otherwise volatile weekly report.

USDCHF is currently hovering around 0.96500, with the pair stuck within a narrow range since the start of the week.

Japan Consumer Inflation Rises

Core consumer prices in Japan edged 0.50% higher from a year ago, marking a seventh consecutive month of gains as the economy makes steady yet slow progress towards meeting the Bank of Japan’s 2.00% inflation target.

The July increase was primarily driven by higher fuel bills, with wage growth continuing to remain subdued, discouraging consumers from lifting their spending.

Core consumer prices in Tokyo, released a month ahead of the nationwide figures, rose 0.40% in August on a yearly basis, just shy of a 0.30% gain forecast by a Reuters poll. The Japanese economy expanded at its fastest pace in over two years during the second quarter. Nevertheless, weak price and wage growth has raised investor concerns over whether the second quarter bounce can be sustained.

AUDJPY was last seen around the 86.550-mark.

France’s Jobless Total Close to 1-Year High

The total number of jobless individuals in France increased in July to the highest level in almost a year, underlining the struggles within the labour market despite an improving economy.

The Labour Ministry report issued on Thursday indicated that the number of people in mainland France registered as out of work rose by 34,900 in July to 3,518,100. The 0.10% year-over-year gain was the biggest since the jobless figure surged by close to 44,000 back in March. Separate data from the state statistics body INSEE showed French industrial morale surged to 111 points in August, the highest since December of 2007.

A Reuters survey of economists had an average projection of 108. CAC 40 futures reversed from the key resistance at 5150 to close Thursday at 5110 before opening slightly higher in early Friday trade.