Past events:
• GBP Claimant Count Change out at 23.5K versus expected -14.6K, previous -9.6K
• USD Building Permits out at 0.62M versus expected 0.63M, prior 0.65M
• JPY Overnight Call Rate out at 0.1% versus expected 0.1%, prior 0.1%
Upcoming Sessions:
• GBP Public Net Borrowing (930GMT)
• USD PPI m/m (1330GMT)
• USD Unemployment claims (1330GMT)
• USD Philly Fed Manufacturing Index (1500GMT)
Market Commentary:
U.K jobless claims unexpectedly jumped this past January to the highest level since April 1997, as the recession continues to steal jobs from businesses across the British Island. Yesterday morning’s Claimant Count Change reported that the number of people receiving unemployment benefits rose to a record 1.64 Million, increasing by a drastic 23,500 claims from the previous month. Last month the number of joblessness claims had dropped by 14.6K – this month, economists were expecting unemployment claims to continue to fall by another 9.6K. Despite this increase, the unemployment rate stayed as expected at 7.8%. In regards to salary, the average earnings index rose a dismal 0.8% last December over the year (1.2% excluding bonuses), versus expected 1.2% – the lowest recorded yearly change in salaries. Despite the disappointing job figures, The GBP was saw little change after the release of the worse than expected claimant count, trading at $1.5770 down 0.115% from the day’s opening of $1.57882.
Moreover, the Bank of England meeting minutes were released and showed that BoE policy makers agreed unanimously pause their £200 billion bond purchasing program. Tuesday’s bullish trend for the GBP/USD took a turn for the worse, as the combination of the BoE vote to suspend its asset purchase program along, push the sterling down 0.744% against the greenback- the pair closed at $1.56647. Early this morning, Britain’s bureau of National Statistics will release the Public Net Borrowing Figure – the difference in spending and income from public operations, central government and local governments. British public expenditure is eyed by the opposition and by investors alike. After many months of extended borrowing, the British government is expected to report negative borrowing of 2.4B,something that could potential help the Pound regain some of yesterday’s losses.
Across the Atlantic, the US released a string of positive economic date – housing starts in the U.S rose in January to 0.59M, a higher level than expected, further illustrating that government support is helping to stabilize the real estate market. At the same time the number of building permits issued slipped 4.9% to 0.62M from the previous month’s report of 0.65M, and an expected 0.63M. Moreover, Industrial production in the U.S rose by 0.9%, more than the January forecast of 0.7% and prior increase of 0.7%, indicating that factories are leading the way of the economic recovery. Capacity utilization – a gauge of slack in the economy — rose to 72.6% in January from 71.9% in December. This is the highest level since December 2008.
Overnight the greenback rose against a basket of currencies extending gains near to 7-month highs after the International Monetary Fund said it planned to sell more gold in the market, pushing down gold prices and commodity-linked currencies. The dollar retained strength from Wednesday’s stronger U.S. economic data, up 1.15% against the Euro as evidence that the Federal Reserve discussed strategies to withdraw monetary stimulus, while fiscal concerns in the euro zone countries continued to drag on the euro.
Later today, the US will release series of important economic data, stating with the January’s PPI. The first of two inflation based data is expecting to show a slight increase of 0.8% from the previous month (the second part of the inflation data will be released tomorrow – core CPI). The US will go on to release its monthly unemployment claims, predicted to remain at its previous level of 440K, followed by the Philly Fed Manufacturing Index- economists predict a number o 17.2, versus last month’s 15.2.
Early this morning, in a unanimous vote, the Bank of Japan decided to leave its overnight call rate at its current low level of 0.1%, as expected. The central bank, refrained from expanding its lending and asset-purchase programs, preserving policy ammunition in case the economic recovery falters or the government increases pressure for more action to beat deflation. The policy board kept the loan facility for commercial banks and monthly purchases of government bonds unchanged, the central bank said in a statement in Tokyo. The bank’s decision to keep policy unchanged signals a deeper threat to the recovery or a surge in the yen may be required to justify further easing. The USD/JPY traded at 90.95, from 91.06 prior to the announcement.
Written by Finexo.com