August 16, 2022

Daily Report 16/08/2022

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Sterling was unable to make headway on Monday with initial selling amid a weaker tone surrounding risk appetite as equities lost ground. Overall confidence in the UK economy also remained notably fragile which sapped potential support. Markets were continuing to monitor political developments with intense pressure for additional action to ease pressure on households ahead of the scheduled surge in retail energy prices in October. Measures to ease pressure will also have a potentially important impact on Bank of England policies which will tend to amplify Sterling volatility over the next few weeks. The UK jobs data recorded a solid increase in August employment, but vacancies declined on the month. Headline average earnings increased 5.1% over the year and above expectations of 4.5% while underlying earnings increased 4.7% from 4.3% which will be of concern to the Bank of England.

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7.00 ILO Unemployment Rate Act. 3.8% Exp. 3.8% Prev. 3.8%
7.00 Claimant Count Change (Jul) Act -10.5K Exp. -32K Prev. -26.8K

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The Euro continued to lose traction ahead of Monday’s New York open with an underlying lack of confidence in the Euro-Zone outlook. The single currency dipped to lows against the dollar before recovering some ground with weaker equities also maintaining an element of US currency demand. The German Economy Minster stated that the country will have bitter medicine to swallow to make the shift to a new energy model. He added that Russia-dependent model has failed and is not coming back while the gas levy will secure supply and added that relief is needed to help people. There were concerns that the imposition of the gas levy on households would put further pressure on the German economy.

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The New York Empire manufacturing index declined very sharply to -31.3 for August from 11.1 previously which was sharply below consensus forecasts of 5.0 and the second-largest monthly decline on record. The new orders component also recorded a very sharp decline to -29.6 from 6.2 previously while there was an even sharper contraction in shipments. There was a further increase in employment, but the rate of increase slowed and the workweek declined. The prices paid index declined, but prices received increased at a slightly faster pace. In contrast to the headline data, companies were slightly less pessimistic over the 6-month outlook, although confidence was still fragile while prices and costs are expected to increase at a faster pace.

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