Summary:
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UK wages hit 11-year high at +3.4% 3m/y
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US retail sales easily beat forecasts
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GBPUSD hits YTD low around $1.24
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Major Wall Street banks beat forecasts on earnings
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The most interesting markets to watch
The latest employment figures have given mixed messages on the health of the UK labour market, with both jobless claims and wages rising. The main takeaway is the larger than expected rise in wages with the increase coming in at the fastest pace in over a decade. Given that inflation for the same month, as measured by the CPI, rose by 2.0% the figures represent a sizable increase in real wages for workers. Looking at the data itself the average weekly earnings came in at +3.4% vs +3.1% for the 3 month period (annualised) to May. The prior was revised a little higher to +3.2% from +3.1% beforehand. Weekly earnings excluding bonuses came in at +3.6% vs a consensus forecast of +3.5% and a prior reading of +3.4%.
US retail sales for June easily beat market expectations showing a healthy gain of 0.4% in monthly terms while the consensus had called for a 0.2% MoM pick-up. Moreover, sales excluding auto and gas jumped 0.7%, smashing expectations pointing to a 0.3% rise. In turn, sales in a control group, the series taken into GDP calculations, increased 0.7% and the reading for May was revised up to 0.6% from 0.5% (headline and core sales readings were revised subtly down though). In response to this report the US dollar has extended its gains while the US 10Y bond yield has ticked up 2 basis points.
The market reaction to these releases is interesting with GBP falling before the data dropped and failing to recover since. On the other hand the stronger US figures have boosted the buck with traders betting that this could lead to a less dovish Fed going forward. As such the GBPUSD is one of the biggest movers today with the cross dropping over 100 pips to trade around the $1.24 handle and make a new low for the year.
Earnings season is now in full swing with a series of major corporations reporting their latest trading updates ahead of the opening bell. Banks in particular are in the spotlight with no fewer than 3 of the big Wall Street firms announcing their latest results this afternoon. Goldman Sachs, JP Morgan and Wells Fargo all beat forecasts for both the top and bottom line and the results can be viewed in more detail here.
Our most interesting markets to watch this week focuses on GBPUSD, AUDUSD and Oil and can be viewed here.
