UK labor data missed its mark sending cable slightly lower in morning London trade as unemployment rolls increased for the first time since August of 2015.
UK reported a slew of labor statistics including a rise in claimant count to 6.7K from -10K decline eyed. Unemployment rate remained the same at 5.1% but average weekly earnings with bonus rose at a modest 1.8% pace versus 2.3% eyed as bonuses in financial sector declined.
Overall it was a mixed report that shows strains on the UK economy both from the global slowdown in demand but perhaps more tellingly from the uncertainty surrounding the Brexit vote. It appears that business hiring has certainly slowed as companies await the outcome of the referendum on leaving the EU scheduled for June 23rd.
Ironically enough the disappointment in labor numbers will only reinforce the strength of the Remain argument as it shows the economic danger of political independence. The latest figures show that Remain has now pulled comfortably ahead by 52% to 43% but some polls have the numbers a bit closer with the latest TNS poll showing 38% to 34% lead. There is a considerable portion of UK population ( up to 25%) that has yet to make up it mind, but given the fact that most people opt for status quo it appears that the Remain vote has the edge.
Certainly the currency market appears to believe that scenario, as cable has rallied more than 250 points over the past few days and even today’s lackluster labor data has been unable to rattle the bulls as cable quickly recovered the knee jerk dip and approached the 1.4400 level by mid morning dealing. For now the pair continues to trade primarily on political news rather than economic data, but given the fact that macro conditions in UK are weakening the upside in the pair is likely to be capped by the 1.4500 level.
In US today we get another housing report as the market will get a look at the Existing Home Sales. Yesterday’s decline in Building Permits and Housing Starts knocked the wind out of the USD/JPY rally and the pair now remains mired at the 109.00 level. The market is looking for a bump to 5.28M units from 5.08M the month prior and if the results print in line with the forecast USD/JPY could make another run to 109.50 but for now the key 110.00 level looks out of reach.