Newsletter – 12th July 2017

Morning Bulletin


  • Despite what on the face of it looked like solid data, Sterling was put on the back-foot yesterday morning following the release of key employment data:
    • Average Earnings Index 3m/y 1.8% as expected
    • Claimant Count Change 6.0K (10.5K Exp)
    • Unemployment Rate 4.5% (4.6% Exp)
  • So whilst the UK Unemployment Rate dropped to its lowest level since 1975, and the claimant count change was far less than expected, the Pound still dropped due to the worryingly low level of growth in Average Earnings. With Inflation soaring to 2.9% last month, the gap between wage growth and inflation now stands at 1.1% placing a real squeeze on UK household spending.
  • Sterling was also dampened by comments from Bank of England Member Broadbent who said he wasn’t ready to vote for a rate rise, citing numerous uncertainties on the economic outlook for the UK.
  • The Bank of Canada (BOC) opted to increase their benchmark interest rate from 0.50% to 0.75% as expected yesterday afternoon.
  • In the accompanying press conference BOC Governor Poloz said he felt the economy could handle this hike very well, and that whilst rates were still low he has no doubt they will rise in time, but emphasised there was no predetermined path for future hikes.
  • Although the rate hike was expected the hawkish nature of Poloz’s words saw the Canadian Dollar rally hard in FX space. GBP/CAD sharply declined from 1.6650 ahead of the release to a low of 1.6353 just a couple of hours later.
  • Speaking before Congress, in her Semi-Annual testimony, the US Fed Chair Janet Yellen said that because the ‘neutral rate’ (Benchmark where Fed’s rate is neither accelerating nor restraining the economy) is currently quite low compared to historical standards, the Fed would not have to raise rates a great deal further to reach a neutral policy stance.
  • The US Dollar was sold off on the back of Yellen’s perceived dovish address.

  • The Bank of Korea (BOK) left their key interest rate at 1.25%as expected. The BOK upgraded their 2017 growth forecastto 2.8% (2.6% Previous).
  • China Trade Balance 294Bn (273Bn Exp)
  • German Final CPI m/m 0.2% as expected
  • French Final CPI m/m 0.0% as expected
  • Swiss PPI m/m -0.1% (0.0% Exp)
  • Very little to look at this morning, however we could see a busy afternoon.
  • Key data due at 1.30pm out of the US in the form of Unemployment Claims and PPI.
  • We will also hear more from US Fed Chair Janet Yellen from 3pm.


Currency Pair Interbank Rate % Change on Day
GBP/EUR 1.1335 +0.35
GBP/USD 1.2935 +0.40
EUR/USD 1.1410 -0.01
AUD/USD 0.7723 +0.59


Time (GMT) Region Data Release Forecast Previous
09.30 GBP BOE Credit Conditions survey
13.30 CAD NHPI m/m 0.3% 0.8%
13.30 USD PPI m/m 0.0% 0.0%
13.30 USD Unemployment Claims 245K 248K
15.00 USD US Fed Chair Yellen Testifies 200K 195K
16.30 USD FOMC Member Evans Speaks
18.00 USD FOMC Member Brainard Speaks