HomeContributorsFundamental AnalysisEuropean Market Update: UK Hourly Wage Data Disappoints

European Market Update: UK Hourly Wage Data Disappoints

UK hourly wage data disappoints


EU Mid-Market Update: Riksbank keeps policy steady but extends its FX mandate; UK hourly wage data disappoints


Sweden’s Riksbank keeps policy steady (as expected) but extends its mandate for possible currency intervention to combat a too strong Krona

UK wage data misses expectations (key BOE metric); offsets improvement in jobless claims data

Fed chair Yellen testimony did little to change outlook on bullish USD environment; all meetings remain ‘live’

Key US data in upcoming session; retail sales data are expected to be strong on the control group measure (used in GDP calculations)



Japanese official out in force to clarify that BOJ policy was not targeting the FX rate. PM Abe, Fin Min Aso, Vice Fin Min of International Affairs (currency chief) Asakawa and BOJ Gov Kuroda). G7 and G20 agreed that its best if FX was set by the market and would agree on any fx intervention, not bilateral


EU’s Dombrovskis reiterated that ECB was not targeting euro exchange rate but has an inflation target it tried to reach

Italy govt said to be in discussions with EU authorities about a potential €5.0B precautionary recapitalization of two regional banks (Popolare di Vicenza and Veneto Banca)


Fed Chair Yellen: waiting too long to tighten would be unwise; more policy adjustments will likely be needed if the economy remains on track; Asked about a March rate rise: every meeting is live; reiterates gradual rate increases are appropriate; colleagues have indicated that will probably be appropriate to lift rates at some point this year


Weekly API Oil Inventories: Crude: +9.9M v +14.2M prior (4th straight build)

Economic data

(NO) Norway Jan Trade Balance (NOK): 25.0B v 23.3B prior

(TW) Taiwan Q4 Final GDP Y/Y: 2.9% v 2.6%e

(ES) Spain Jan Final CPI M/M: -0.5% v -0.5%e; Y/Y: 3.0% v 3.0%e

(ES) Spain Jan Final CPI EU Harmonized M/M: -1.0% v -0.9%e; Y/Y: 2.9% v 3.0%e

(DK) Denmark Q4 GDP Indicator Q/Q: 0.4% v 0.2% prior

(ZA) South Africa Jan CPI M/M: 0.6% v 0.7%e; Y/Y: 6.6% v 6.7%e (5th straight month annual inflation above SARB target range of 3.0-6.0%)

(SE) Sweden Central Bank (Riksbank) left its Repo Rate unchanged at -0.50% (as expected); extends its mandae on FX intervention

(UK) Jan Jobless Claims Change (beat): -42.4K v +0.5Ke; Claimant Count Rate: 2.1% (lowest since Jun 2008) v 2.3%e

(UK) Dec Average Weekly Earnings (miss) 3M/Y: 2.6% v 2.8%e; Weekly Earnings (ex Bonus) 3M/Y: 2.6% v 2.7%e

(UK) Dec ILO Unemployment Rate 3M/3M: 4.8% v 4.8%e

Fixed Income Issuance:

(IN) India sold total INR100B vs. INR100B indicated in 3-month and 12-month Bills

(DK) Denmark sold DKK1.26B in 6-month Bills; Yield: -0.680% v -0.685% prior

(SE) Sweden sold SEK7.5B vs. SEK7.5B indicated in 3-month bills; Avg Yield: -0.6735% v -0.7260% prior; bid-to-cover: 1.25x v 1.71x prior

(NO) Norway sold NOK5.0B vs. NOK5.0B indicated in 1.75% 2027 Bonds; Avg Yield: 1.82% v 1.36% prior; Bid-to-cover: 2.69x v 1.79x prior


Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 +0.6% at 3,329, FTSE +0.5% at 7,305, DAX +0.4% at 11,819, CAC-40 +0.5% at 4,919, IBEX-35 +0.7% at 9,577, FTSE MIB +0.7% at 19,318, SMI +0.6% at 8,475, S&P 500 Futures flat]

Market Focal Points/Key Themes: European equity indices are trading higher led by financial stocks after Fed Chair Yellen told the US Senate Banking Committee that waiting too long to tighten would be ‘unwise’; Shares of Deutsche Bank and BBVA the notable gainers in the Eurostoxx as a result; Asia generally ending positive overnight; Commodity and mining stocks trading generally higher in the FTSE 100 as copper consolidates near contract highs.

Upcoming scheduled US earnings (pre-market) include Analog Devices, ALLETE, Alkemes, Bunge, Cincinnati Bell, Colliers International, NOW Inc, Entergy, Groupon, Hilton Worldwide, Huntsman, Lithia Motors, Manitowoc Foodservice, Och-Ziff Capital, Pepsico, Shopify, SodaStream, Targa Resources, US Foods, and Wyndham Worldwide.

Equities (as of 09:50 GMT)

Consumer Discretionary: [Air Liquide AI.FR -1.4% (FY16 results), Heineken HEIA.NL +4.5% (FY16 results), Hennes & Mauritz HMB.SE -0.9% (Jan sales)]

Consumer Staples: [Danone BN.FR +0.2% (FY16 results)]

Financials: [ABN Amro AABA.NL +2.8% (Q4 results), Credit Agricole ACA.FR +5.4% (Q4 results), Irish Residential Properties IRES.IE +1.7% (prelim FY16 results), Natixis KN.FR +2.3% (under investigation in France over announcements made in 2010 on subprime crisis), Patrizia Immobilien P1Z.DE +1.5% (prelim FY16 results)]

Industrials: [Kuka KU2.DE +0.1% (prelim FY16 results), Pfeiffer Vacuum PFV.DE +0.9% (FY16 results, Busch Group offer ‘unattractive’), Schindler Holding SCHP.CH +1.3% (FY16 results), SSAB SSABA.SE -2.2% (Q4 results), Zodiac Aerospace ZC.FR -2.8% (reportedly TCI seeks to block merger with Safran)]

Materials: [Akzo Nobel AKZA.NL -3.7% (Q4 results), DSM DSM.NL -1.9% (Q4 results)]


Sweden Central Bank (Riksbank) Policy Statement noted that monetary policy needed to remain expansionary and still saw a greater chance of a rate cut than a hike. Economic activity was strengthening, but there was considerable political uncertainty abroad and the risks of setbacks have increased. For inflation to stabilize around 2%, a continued strong level of economic activity and a SEK currency (krona) that did not appreciate too rapidly are required. First potential rate hike not seen before 2018 and extended its currency intervention mandate (member Floden had reservations)

Sweden Central Bank (Riksbank) Gov Ingves post rate decision press conference noted that the developments over the past few months had been in-line with expectations with inflation accelerating

Greece PM Tsipras reiterated its govt red-line stance that would be destructive to discuss extra austerity measures

EU’s Moscovici stated that Greece had outperformed its fiscal target in 2016. Could achieve same results in coming two years (2017-18 period). Bail-out review could reach a conclusion with extra effort from all parties

Moody’s commented on Italy: Euro exit risks were very low but political dynamics were unpredictable. Withdrawal from euro area, associated currency redenomination would be significant credit event for Italian sovereign

Russia Central Bank (CBR) Gov Nabiullina: End-Jan CPI declined to 5.0% y/y. Low inflation helped the shift to investment-led growth

Russia govt spokesman Peskov: President Trump’s team contact were normal diplomatic practice

Bank of Japan (BOJ) Gov Kuroda reiterated view that central bank was not targeting FX as its policy was aimed at achieving the 2% inflation target (in-line with earlier comments during Asian session). FX level affected by many factors as interest rates were not the only variable

China PBoC working paper stressed that macro policies should remain prudent and neutral. Efforts should be made to avoid liquidity crisis and “debt-

Iran Oil Min Zanganeh: Oil export capacity has risen to 2.8M bpddeflation” trap due to rapid deleveraging


Fed chair Yellen testimony did little to change outlook on bullish USD environment as the greenback maintained its firm tone against the majors.

USD/JPY stayed in the mid-114 area as a plethora of Japanese officials continued to clarify that BOJ policy was not targeting the FX rate. PM Abe, Fin Min Aso, Vice Fin Min of International Affairs (currency chief) Asakawa and BOJ Gov Kuroda). G7 and G20 agreed that its best if FX was set by the market and would agree on any fx intervention, not bilateral

Better UK employment data could not help the GBP currency as dealers instead focused on the hourly wage data (a key BOE metric). GBP/USD fell below the 55-day moving average of 1.2433 after hour wages came in at 2.6%, two-tenths below expectations

USD/SEK moved higher to test above 9,46 level after Sweden’s Riksbank kept its policy steady (as expected) but extended its mandate for possible currency intervention to combat a too strong Krona.

Fixed Income:

Bund futures trade at 163.39 down 3 ticks continuing to retrace as risk on tone continues with new all time high in S&P 500, Dow and Nasdaq. A move back higher targets 163.64 initially followed by 164.07, 164.46 then 164.94. Support moves to 162.92 followed by 162.44.

Gilt futures trade at 125.31 up 16 ticks trading just off highs on the back of weaker hourly wage data out of the UK. Resistance moves to 125.56 followed by 125.90 then 126.28 A move back below 125.14 low targets 124.91 followed by 124.46. Short Sterling futures trade flat with Jun17Jun18 trading 19bp choice.

Wednesday’s liquidity report showed Tuesday’s excess liquidity rose to €1.324T up €2B from €1.322T prior. Use of the marginal lending facility falls to €296M from €353M prior.

Corporate issuance saw $9.9B come to market via 5 issuers headlined by Morgan Stanley $3B 3 year floaters, Novartis 3 part $3B offering, and JP Morgan $2B 31 year bond offering. Issuance for the week stands at $16.6B with Monthly issuing surpassing $40B.

Looking Ahead

05:30 (UK) DMO to sell 0.125% I/L 2026 Gilts

05:30 (PT) Portugal Debt Agency (IGCP) to sell €1.0-1.25B in 3-month and 12-month Bills

06:00 (IE) Ireland Dec Trade Balance: No est v €4.1B prior

06:00 (ZA) South Africa Dec Retail Sales M/M: 0.4%e v 3.5% prior; Y/Y: 2.2%e v 3.8% prior

06:00 (BR) Brazil Dec IBGE Services Sector Volume Y/Y: No est v -4.6% prior

06:00 (RU) Russia to sell combined RUB40B in 2022 and 2026 OFZ Bonds

07:00 (US) MBA Mortgage Applications w/e Feb 10th: No est v +2.3% prior

08:15 (UK) Baltic Dry Bulk Index

08:30 (US) Feb Empire Manufacturing: 7.0e v 6.5 prior

08:30 (US) Jan CPI M/M: 0.3%e v 0.3% prior; Y/Y: 2.4%e v 2.1% prior

08:30 (US) CPI Ex Food and Energy M/M: 0.3%e v 0.2% prior; Y/Y: 2.1%e v 2.2% prior

08:30 (US) Jan CPI Index NSA: 242.445e v 241.432 prior; CPI Core Index SA: No est v 249.93 prior

08:30 (US) Jan Real Avg Weekly Earnings Y/Y: No est v 0.2% prior, Real Avg Hourly Earning Y/Y: No est v 0.8% prior

08:30 (US) Jan Advance Retail Sales M/M: 0.1%e v 0.6% prior; Retail Sales Ex Auto M/M: 0.4%e v 0.2% prior, Retail Sales Ex Auto and Gas: 0.3%e v 0.0% prior, Retail Sales Control Group: 0.3%e v 0.2% prior

08:30 (CA) Canada Dec Manufacturing Sales M/M: 0.3%e v 1.5% prior

09:00 (CA) Canada Jan Existing Home Sales M/M: No est v 2.2% prior

09:00 (BE) Belgium Dec Trade Balance: No est v €0.6B prior

09:15 (US) Jan Industrial Production M/M: 0.0%e v 0.8% prior; Capacity Utilization: 75.5%e v 75.5% prior, Manufacturing Production: 0.2%e v 0.2% prior

10:00 (US) Feb NAHB Housing Market Index: 67e v 67 prior

10:00 (US) Dec Business Inventories: 0.4%e v 0.7% prior

10:00 (US) Fed Chair Yellen semi-annual testimony before House Panel

10:30 (US) Weekly DOE Crude Oil Inventories

11:30 (IL) Israel Jan CPI M/M: -0.3%e v 0.0% prior; Y/Y: 0.0%e v -0.2% prior

12:00 (US) Fed’s Rosengren to address NY Assoc for Business Economics

12:00 (CA) Canada to sell 5-Year Bonds

12:45 (US) Fed’s Harker speaks in Philadelphia

16:00 (US) Dec Total Net TIC Flows: No est v $23.7B prior; Net Long-term Tic Flows: No est v $30.8B prior

(PE) Peru Jan Unemployment Rate: No est v 6.2% prior

(PE) Peru Dec Economic Activity Index (Monthly Index) Y/Y: 3.3%e v 3.6% prior

(PE) Peru Q4 GDP Y/Y: 2.9%e v 4.4% prior

(NG) Nigeria Jan CPI Y/Y: 18.6%e v 18.6% prior

(CO) Colombia Jan Consumer Confidence Index: -11.5e v -10.7 prior

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