UK labour market data was a mixed bag but showed wages rose at the fastest pace in 11 years by 3.7 per cent and employment reached a record high in three months up to June. The number of people in work rose by 115,000, taking the employment rate to a joint record high of 76.1 per cent.
Stronger earnings growth is likely to put upward pressure on inflation, making it more difficult for the Bank of England to justify any monetary easing. Meanwhile, political fears continue to undermine sentiment despite the US and UK looking to agree a trade deal at an upcoming G7 Summit this month.
Worries over Germany’s economy have intensified, after investor confidence hit its lowest level since 2011. German ZEW economic sentiment data released yesterday, 13 August showed a further decline well below consensus forecasts and its weakest reading since November 2011. The report reinforced concerns over the German and wider Eurozone outlook, especially given a sharp dip in Eurozone confidence for the month.
This morning, Germany’s second-quarter GDP came in as expected but showed Europe’s largest economy contracted yet again on protracted trade tensions, growing uncertainty around Brexit and a slowdown in the global economy.
In Italy, the Senate delayed the no-confidence vote until next Tuesday, 20 August.
Across the Atlantic, the Dollar edged higher as US President Donald Trump delayed his 1 September deadline for 10 per cent tariffs on some Chinese imports in the hope of blunting their impact on US holiday sales.
Consumer prices in the US increased by 0.3 per cent in July, in line with forecasts. The year-on-year increase was slightly higher than the expected 1.6 per cent, at 1.8 per cent.
In the meantime, there was a shift in Fed funds futures, with chances of a 0.50 per cent interest cut at the Federal Open Monetary Committee’s (FOMC) September meeting declining from 20 per cent to around 7 per cent.
In China, data released earlier today, 14 August pointed to further weakness in the world’s second largest economy. In July, the country’s industrial output rose by 4.8 per cent year on year and retail sales grew by 7.6 per cent compared to the previous year – its slowest rate since 2002.
While Beijing stated it will resume talks with Washington next month, foreign-exchange strategists polled by Reuters suggested that the renminbi will weaken further beyond the current rate of 7 per Dollar over the coming year.
China lowers midpoint for seventh straight day
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