Intraday Market Thoughts

GBP Awaits Jobless Figures, Moody's Watches French Banks

by Kyle Morrison
Jun 15, 2011 8:34

Sterling in focus this morning as unemployment data are awaited, Greece concerns still drag as Moodys puts French banks on review, Eurozone industrial production expected to remain weak.

With inflation in the UK remaining firmly entrenched as per yesterdays CPI numbers and likely to rise in the coming months on the back of higher energy costs, businesses in the UK will find margins continuing to come under pressure as consumers batten down the hatches. This could well see the unemployment numbers struggle to come down especially if business becomes reluctant to hire. Todays unemployment data for May are expected to show an improvement in jobless claims to a rise of 6.5k from Aprils 12.4k rise while the ILO unemployment rate for the three months to April is expected to remain constant at 7.7%.

Average earnings data for the 3 months to April will also be of particular interest with respect to any rise from the 2.1% level of the previous three months. The Bank of England will be looking for evidence of any type of build-up of wage price inflation which could well dictate when the committee might start to raise interest rates. Any significant rise in this headline figure could suggest that wages are starting to rise in response to the recent high levels of inflation and prompt the beginning of a broader shift towards a rise in rates.

Cable faces resistance near 1.6450s and EURGBP at 0.8850.

Eurozone industrial production has for quite some time now been slipping back, and the expectation for April is no different with expectations of a month on month decline of 0.2%, suggesting that the problems within the Eurozone with respect to sovereign debt are now provoking a slow down in the growth picture.

Yesterday the OECDs leading indicators index suggested that major European economies were starting to see a significant slowdown in growth with the sharpest falls in Italy and France, the two largest economies after Germany.

Euro holds up despite all of the above, but until such time as policymakers are able to come up with a solution that satisfies both Germany and the ECB, no small task, then we could well find that further upside in the euro could be subject to sharp pullbacks. This failure to agree has prompted ratings agency Moodys to put Frances top banks on review for a downgrade over Greece this morning.


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