EUR/GBP, GBP/USD flows: Still a nervy mkt, UK data soft
UK data overall soft, supports a cautious approach from the BoE
Even with the more positive, but erratic, Iran comments, mkt still edgy
Dual focus on the recent tech pullback, and upcoming earnings
UK labour market data comes in pretty soft overall. Unemployment is back to 5% in the 3mths to March, and while average earnings was slightly above expectations at 4.1% from 3.9%, regular pay dropped to 3.4% from 3.6% ex-bonus in line with expectations. At close to 3%, underlying pay is already near to levels consistent with the inflation target. The broader context is vacancies moving down to the lowest since Feb 2021 and the more volatile HMRC payrolls data showing a drop of 100k in March, worst since the pandemic, albeit prone to revision. Probability of a BoE hike nudge in a touch, currently around 28% for June and 61% for July. While overall soft and supporting a cautious BoE approach, modest EUR/GBP reaction seen, up around 10 ticks, and consolidating yesterday’s profit-taking back in the yearly’s range.
The broader focus is more on the pullback seen in very stretched tech driven risk appetite, amid the still elevated bond market yield levels, even as Trump talks up the prospect of an Iran deal.
Overnight, Kospi down 3%, albeit barely extending Monday’s low, metals a little softer, though likewise no news lows for the week, while USD/Asia has been mixed but still net higher even with the oil relent (oil hasn’t yet really broken the recent uptrend yet and is very much waiting to be convinced on Iran after all the erratic shifts in tone for weeks with no actual progress). Next tech focus is in Nvidia Wednesday to see if it’s a AI-complex ‘sell the fact’ moment rather than a fresh melt up higher.