Sterling was able to hold a firm tone after Friday’s European open with high domestic yields continuing to underpin the UK currency. UK yields declined only slightly during the day while US yields declined more substantially following the jobs data. Bank of England monetary policy committee Mann stated that there is evidence of inflation becoming embedded in the economy and that it is taking longer to decline than it did to rise. She reiterated that it is better to frontload rate hikes in a backdrop of inflation uncertainty.
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20.00 Andrew Bailey Speech
The Euro jumped higher after the data on Friday afternoon, especially as markets were braced for a stronger headline figure following the ADP data on Thursday. The single currency corrected lower, but then gained fresh traction later in the session and tested marginally higher ahead of the European close with 10-day highs. In comments over the weekend, ECB council member Villeroy stated that he expects interest rates to peak soon and plateau for a long time.
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US non-farm payrolls increased 209,000 for June, below consensus forecasts of around 225,000 and followed a revised 306,000 increase the previous month. Manufacturing jobs increased 7,000 on the month with a 23,000 increase in construction jobs. There were monthly declines in retail, transport and temporary help jobs while government jobs posted a strong 60,000 increase. According to the household survey, the unemployment rate edged lower to 3.6% from 3.7% and in line with market expectations. The participation rate was unchanged on the month with a reported 273,000 increase in the number of employed. Average hourly earnings increased 0.4% for the month, slightly above expectations of 0.3%, with a year-on-year increase of 4.4%, unchanged from the previous month.
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