The British pound strengthened against both the dollar and the euro, after UK labor data released Friday showed unemployment dropping to its lowest since July 2008.
By Peter Martin
Friday, April 17, 2015
The Office for National Statistics revealed that the number of people claiming jobseeker’s allowance in the UK fell by 20,700 in March, while ILO unemployment dropped 76,000 in the three months to February, pushing the unemployment rate down to 5.6%. Average earnings grew 1.7% and while that level of wage growth is unlikely to spur the Bank of England into hiking rates anytime soon, the improvements in the labor market indicated by today’s data was enough to push GBP/USD up 0.44% to 1.5000 by early morning in New York.
The dollar also lost ground against its Canadian counterpart, with the Loonie receiving a boost from a collection of upbeat data releases. Canadian retail sales rebounded sharply in February, bouncing 1.7% after a 1.4% decline in January and exceeding expectations. There are also signs of inflation firming up in Canada — the March CPI rose a higher-than-expected 0.7%, after a 0.9% increase in February, which lifts the annual inflation rate to 1.2% from 1.0% in the month prior. Core CPI is 2.0% higher year-on-year.
Based on this latest report, Canadian inflationary pressures are far more pressing than in the US, which is an interesting comparison, given the Bank of Canada’s dovish approach to monetary policy (the central bank said in a statement on Wednesday that ‘the Canadian economy is estimated to have stalled in the first quarter of 2015’) and expectations that the Fed is looking to tighten. US CPI data was also released this morning and looks extremely tame, despite support from firming energy prices. US CPI rose 0.2% in March, taking the annual inflation rate to 0.0% (up from -0.1% in February). Core CPI also increased 0.2%, nudging the annual core rate up to 1.8%. USD/CAD slid 0.5% to 1.2123.
Inflation is showing signs of life in the Europe as well. The Harmonized Index of Consumer Prices (HCIP) for the eurozone rose 1.1% in March, confirming the earlier findings of the flash report. This big pick-up in inflation will be warmly welcomed, but it is still not quite enough to push the annual inflation rate into positive territory, lifting it to -0.1% from -0.3% in the previous month. ECB President Mario Draghi was upbeat in his press conference yesterday regarding the inflation outlook, saying that he expects increases later in 2015 ‘supported by the favorable impacts of our monetary policy’ and also claiming ‘there is clear evidence that the monetary policy measures we have put in place are effective.’ Given that today’s inflation report was in line with the mid-month indication, the effect on the euro was minimal and EUR/USD was little-changed in early trading at 1.0760.
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