The Pound began Tuesday on the back foot against the Euro (GBP/EUR) and US Dollar (GBP/USD), yet made some progress against the South African Rand (GBP/ZAR).
The British currency had been trading tentatively against other majors ahead of influential labour market data; GBP remained lower versus EUR and USD following the figures. While there was some positive news for the UK economy in terms of job creation, wages including bonuses dropped from 2.8% to 2.6% in the three months through March on the year, which did little to boost sterling. Meanwhile, excluding bonuses wage growth increased in line with forecasts from 2.8% to 2.9%. The UK Unemployment Rate number held steady at 4.2%, but the Employment Change figure smashed forecasts, coming in at 197K. Economists had expected only 129K following the previous 55K reading.
— ONS (@ONS) 15 May 2018
Meanwhile, it’s thought months of German coalition talks could have hindered growth in the Eurozone’s largest economy after growth halved in the last quarter. The first quarter registered only 0.3% growth, while the annual figure dropped from 2.9% to 2.3%. There’s been plenty of speculation as to whether Germany is slowing down, and evidence of late seems to be supporting these theories.
ING Economist Carsten Brzeski said:
‘Trade and government consumption were a drag on growth. Also, don’t forget that a couple of one-off factors like the cold winter weather, early Easter vacation and strikes probably distorted first quarter data.’
Brzeski believes that markets shouldn’t be too alarmed by the downturn, suggesting that the German economy still has plenty of strength left.
‘Despite some minor levelling off, capacity utilisation is still close to record highs, assured production in the industry is close to all-time highs and the high stock of orders and historically low inventories all bode extremely well for industrial production in the coming months.’
Markets could witness some more interesting developments today with the release of the US Advance Retail Sales data. The April number is expected to come in at 0.3% in April, a decline in comparison to the previous month’s 0.6%.
South Africa will release it’s latest Unemployment Rate and Unemployed Persons data this morning which could potentially give the Rand some excuse to recover if the data prints positively.
Update 14:30: The South African Unemployment Rate remained at 26.7% in quarter one, while the Unemployed Persons stat rose to 6.0M from 5.9M. Meanwhile, US Retail Sales came in at 0.3% in April as predicted. Meanwhile, the March figure was positively revised to 0.8%.
Economist James Knightly commented:
‘US retail sales have been heavily distorted over the past 6-9 months, but we are finally getting some “cleaner” data that suggests households are in good spirits and are spending in the new season.’
The Pound to South African Rand (GBP/ZAR) exchange rate is trending at 17.0075. The Pound to US Dollar (GBP/USD) exchange rate is trading at levels of 1.3460. The Pound to Euro (GBP/EUR) exchange rate is trading at 1.1375.