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UK hiring plans at 16-year high, according to BDO report
UK firms intend to hire staff at the fastest rate for 16 years, research suggests.
Accountancy firm BDO said its jobs index for July, which measures hiring plans over the next three months, was at its highest level since 1998.
A "significant uptick" in hiring plans by services firm in particular was driving the increase, BDO said.
An increase in the rate of job creation is expected for the rest of the year, the survey found.
BDO's optimism index - which measures businesses' expectations over the next six months - was at its highest level for more than a year in July.
"The unprecedented growth we've seen in UK employment this year looks set to continue," said BDO partner Peter Hemington.
But he warned that some services firms were already citing concerns over a shortage of skilled workers, and said "readily available and flexible labour from Europe" could help to relieve short-term pressure on businesses.
"To address this, the government must ensure its protectionist tendencies are put on hold until productivity returns to pre-crisis levels," he added.
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GBP/USD: Trading the US JOLTS Job Openings
JOLTS Job Openings measures the change in the number of employment openings last month, excluding the farm industry. A reading which is higher than the market forecast is bullish for the dollar.
Here are the details and 5 possible outcomes for GBP/USD.
Published on Tuesday at 14:00 GMT.
Indicator Background
Job creation is one of the most important leading indicators of overall economic activity. Thus, publication of employment data such as JOLTS Job Openings is highly anticipated by the markets, and the indicator can have a strong impact on the direction of GBP/USD.
JOLTS Job Openings continues to move upwards, indicative of an improving US labor market. The indicator rose to 4.64 million last month, beating the estimate of 4.53 million. The markets are expecting the upturn to continue in July, with the estimate standing at 4.74 million.
Sentiment and Levels
The heady days when cable was above 1.70 seem long gone, as the currency continues to struggle. Market sentiment remains supportive of the US dollar as the US recovery continues to gather steam. The dollar has enjoyed broad strength and this could continue if key data remains strong. So, the sentiment is bullish on GBP/USD towards this release.
Technical levels from top to bottom: 1.7108, 1.6989, 1.6823, 1.6669, 1.66 and 1.6646.
5 Scenarios
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UK firms hurt by Russian embargo on food imports
UK firms have been hit by a Russian ban on food imports from a number of Western countries.
The tit-for-tat ban, imposed on Thursday, bars imports from countries which have imposed sanctions on Russia over the conflict in Ukraine.
"It will have a big impact on business," said Sinclair Banks, boss of fishing and fish processing firm Lunar.
The firm, based in Peterhead in north-east Scotland, exports 16% of its mackerel and herring to Russia.
Larger firms, such as B&Q owner Kingfisher, have also warned they could be affected.
Kingfisher chief executive Sir Ian Cheshire told BBC Radio 5 live it was "sensitive" towards any potential disruption.
"We're clearly concerned that if it went further it would impact us and we're just having to wait and see and also try and switch where we can to more domestic sources [for products]. But the market longer-term for us there is still a solid one," he added.
Waitrose managing director Mark Price told 5 live that Western goods due to be exported to Russia might now look to be sold in the UK.
"Europe's a huge market and Britain's just one part of it. But if they do find their way to the UK then that could well put some downward pressure on prices," he said.
Pound Falls to Nine-Week Low as Food Sales Drop Amid Price Wars
The pound dropped to its lowest level in almost nine weeks versus the dollar as a report showing U.K. food sales tumbled the most in at least 5 1/2 years curbed demand for British assets.
The U.K. currency fell for the fourth time in five days as supermarkets’ price cuts led to the biggest decline in sales by value since the British Retail Consortium data series began in December 2008. Bank of England Governor Mark Carney will deliver new economic projections in the quarterly Inflation Report tomorrow, which may offer clues on the timing of the institution’s first increase in borrowing costs since 2007.
“The retail sector is not looking quite as robust as it was earlier in the summer and as a consequence of that, that will keep sterling a little bit on the defensive,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “We’ve got markets increasingly focusing on that quarterly Inflation Report as well but I think there’s still a risk that sterling has a little more downside to come in the shorter term.”
The pound fell 0.1 percent to $1.6779 at 10:50 a.m. London time, after touching $1.6757, the least since June 11. Sterling strengthened 0.3 percent to 79.52 pence per euro as the 18-nation currency declined on a slump in German investor confidence.
The pound may drop toward $1.67 before tomorrow’s Inflation Report, Stretch said.
Great post for today , thank you .
Doubts on rate rise timing begin to turn tide for sterling
Over five tough summer weeks investors have slashed their bets on a stronger pound by 75 percent as still-miserly earnings growth calls into the question the timing of the first UK interest rate rises in over seven years.
Sterling's retreat - around 2.3 percent, or almost 4 cents, against the dollar since early July - has come chiefly via a rebound for the U.S. currency. But UK data, albeit only slightly weaker, has also had an impact, casting at least some doubt on once-popular bets that rates would rise this year.
CFTC data shows speculative investors have cut net long positions in sterling from more than 52,000 contracts in late June to just over 12,000 in the first week of August.
The Bank of England has said little to bolster expectations rates will rise this year and even if minutes from its most recent monetary policy meeting later this month reveal the first vote for an immediate hike, money markets are only pricing in a small chance of higher rates by the end of the year.
That is not to say the G7's fastest-growing economy will not soon need to be cooled off a bit - a Reuters poll on Tuesday showed economists slightly increased their bets on a rate rise by the end of the year. But the consensus remained for it to come in the first quarter of 2015.
Deeper-rooted doubts are emerging among market participants and, it seems, policymakers too, about the labour market, inflation and the solidity of Britain's economic upturn.
While the BoE's quarterly inflation report due on Wednesday, with the accompanying tweak in the bank's view on inflation and growth, should take centre stage this week, wage numbers the same day - forecast to show an outright fall in earnings - may prove just as influential.
"Policy in general in the developed world will continue to be kept looser than it ever had in times past and I don't think the BoE is any exception to that," said Simon Derrick, head currency strategist at Bank of New York Mellon, adding that rates could be kept on hold until after May's general election.
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Pound Advances Third Day Versus Euro Before BOE Inflation Report
The pound strengthened a third day versus the euro as investors prepared to mine the Bank of England’s quarterly Inflation Report for guidance on when the bank will start to increase interest rates.
U.K. government bonds fell before central bank Governor Mark Carney presents the report, which will also include the institution’s updated economic projections. While Carney said in a June speech at Mansion House that the BOE may raise its key interest rate from a record earlier than investors expected, he since softened that stance. Last month he said that any increases in interest rates will be determined by the data.
“The market will be using the Inflation Report to second-guess the timing and extent of U.K. rate hikes,” said Lee McDarby, executive director of U.K. corporate foreign-exchange sales at Nomura International Plc in London. “Since his Mansion House speech, Carney may be quite conscious of the power of his hawkishness. We are seeing this come through now as he makes references to not wanting to rock the boat of U.K. recovery.”
McDarby said although he is calling for the pound to “remain lower, testing through $1.6750 to $1.6720, a hawkish Carney would no doubt result in us having to re-evaluate that short-term view.”
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Pound Catches a Cold on Sluggish Wage Growth
Although geopolitical anxiety is still festering in the background, financial markets have focused their attention on fundamental economic drivers this morning, with a dearth of data to parse through as we hit the midway point of the week. The much anticipated second quarter GDP numbers for the Japanese economy were released overnight, and you could almost hear a collective sigh from Prime Minister Abe and the rest of his government when the figures came in just slightly better than economists had forecast. The modestly better than anticipated number was still an annualized contraction of 6.8% as the tax hike in April severed personal consumption which lead to private demand dropping by 5.0% over the quarter, though capital expenditures and external demand held up modestly better than forecast, helping the final GDP number narrowly miss the 7.1% decline that had been expected. The substantial drawdown for growth in the real economy over the second quarter has more or less been priced in given the tax hike, with attention now turning to how the economy recovers in the penultimate quarter to assess whether the BoJ may have to look at more accommodative monetary policy measures to combat a downturn in demand from lagging effects of the sales tax hike. Supportive comments from the economy minister and the narrow beat helped the Nikkei keep afloat, with the equity index posting a gain of 0.35% as USDJPY levitated off of the low-102s.
While a fairly significant contraction in the Japanese economy had been expected, what was unexpected was the dovish sounding Bank of England Governor across the pond, as Mr. Carney addressed the media to speak to the BoE’s quarterly inflation report. Although the head of the BoE did mention economic slack was estimated to be running at only 1% of overall GDP, the cut in the forecast of wage growth to increase by only 1.25% in 2014 (from the originally projected 2.5%), illustrated the current slack in the labour market would take longer to absorb than the central bank had anticipated. This assessment of stubbornly low wage growth comes on the heels of June’s employment numbers, which even with the jobless rate falling to 6.4%, still saw wage growth contract by 0.2% over the month. With Carney and the BoE telegraphing a more cautious approach to monetary policy than a few months ago, traders and investors has scaled back expectations that rate hikes are just around the corner, with the 10-year Gilt sliding to 2.46% and the GBPUSD cratering into low 1.67s after a 0.5% drop, the pair’s lowest level since early June.
As we head into the North American open, S&P futures have taken a bit of hit and are off the overnight highs seen earlier in the session after Retail Sales for the month of July for the American economy missed expectations and were flat over the month. When you strip out the more volatile items such as gas and autos there was a 0.1% increase over the month, in addition to June’s number being revised higher from 0.5% to 0.6%; yet the prior month’s revisions have done little to hide the disappointment in the headline number, with the big dollar catching an offer tone across the majors, helping the Pound and Yen claw back some of their earlier losses. As exposure to the USD is culled, the Loonie has seen some buying interest that has taken the pair back into the low-1.09s. The economic calendar for Loonie traders is sparse until Friday when Manufacturing Sales hit the wires, with a strong number giving bulls a chance to see if they can convincingly take back the 1.08s.
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Pound Drops to Least Since April as Miles Says Rate Can Stay Low
The pound fell to the lowest level versus the dollar in four months as signs Bank of England policy makers are in no rush to increase interest rates sapped demand for the U.K. currency.
Sterling depreciated versus all but one of its 16 major peers as Monetary Policy Committee member David Miles said the bank could keep rates at record-low levels for “a bit longer yet.” Societe Generale SA pushed back its forecast for the central bank’s first rate increase by a quarter, to the first three months of 2015, after BOE Governor Mark Carney said yesterday Britain’s expansion “faces some challenges.” U.K. 10-year bond yields fell to the lowest in a year.
“It is hard to avoid the conclusion that they simply want to keep rates as low as possible for as long as possible irrespective of the outturn in economic data,” said Peter Kinsella, a senior currency strategist at Commerzbank AG in London. “I think the best way to articulate a mildly bearish sterling view is to go short” the pound versus the dollar, he said. A short position is a bet an asset will decline in value.
Sterling was little changed at $1.6678 at 11:05 a.m. London time after touching $1.6658, the least since April 8. It fell below its 200-day moving average at $1.6664 for the first time in 11 months. The pound depreciated 0.2 percent to 80.21 pence per euro after touching 80.27 pence, its weakest level since June 30.
The 10-year gilt yield fell two basis points, or 0.02 percentage point, to 2.42 percent, after falling to 2.39 percent, the lowest since August 2013. The 2.25 percent bond due in September 2023 rose 0.16, or 1.60 pounds per 1,000-pound face amount, to 98.615.
The two-year rate dropped two basis points to 0.69 percent after falling nine basis points yesterday.
Gilts returned 6.1 percent this year through yesterday, Bloomberg World Bond Indexes show. That compares with a gain of 6.4 percent for German securities and 4 percent for Treasuries.
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GBP/USD Declines to Low Not Seen Since Mid-April
The GBP/USD broke to its lowest level since mid-April as traders continued to react to signs that Bank of England policymakers were likely to push its first interest rate hike since 2007 well into 2015.
The Sterling fell again on Thursday after Monetary Policy Committee member David Miles said the central bank could keep rates at record-low levels for “a bit longer yet.” This was in addition to yesterday’s comments from BOE Governor Mark Carney who said the U.K’s expansion “faces some challenges.”
The EUR/USD traded lower early in the session after a report showed French Preliminary GDP came out lower-than-expected at 0% versus the estimate of 0.1%. German Preliminary GDP was reported at -0.2%. This was lower than the estimate of -0.1% and far below the last report of 0.8%. Euro Zone Flash GDP was reported at 0.0%. This was also lower than the 0.1% estimate.
The Euro rebounded against the dollar later in the session after U.S. Weekly Unemployment Claims rose more than expected. Traders were looking for a reading of 307K. The actual number was 311K. This figure was also a six-week high.
December Comex Gold futures are trading flat-to-higher. Prices pushed higher after the release of the U.S. jobless claims report. This report suggested the economy was still sputtering, creating the uncertainty that was underpinning the market. Gold also received some support following the release of the dismal Euro Zone economic numbers.
Gold remains rangebound because of the lack of demand from investors. Money is still pouring into the stock market which is hurting demand for gold. The recent rally in gold has been driven more by short-covering rather than fresh buying although some buyers are being driven by geopolitical events.
October Crude Oil is trading lower after taking out last week’s low at 2.5753. Traders are once again pounding the market because yesterday’s Energy Information Administration (EIA) report for the week-ended August 8 showed an unexpected increase in oil stocks. Traders were expecting a decline in supply.
Geopolitical events are not affecting oil prices at all and are not likely to be an influence unless they cause a supply disruption. At this time, the primary focus is the slowdown in demand and the oversupply.
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