May 17, 2022

Daily Report 17/05/2022

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The ILO Unemployment Rate in the UK declined to 3.7% in three months to March from 3.8%, the UK’s Office for National Statistics reported on Tuesday. This reading came in slightly lower than the market expectation of 3.8%. Further details of the publication revealed that the Claimant Count Change in April was -56.9K, compared to analysts’ estimate of -38.8K. Finally, the Average Earnings Including Bonus and Excluding Bonus rose by 7% and 4.2%, respectively, on a yearly basis. Sterling lost ground in early Europe on Monday with significant selling against the Euro. There was, however, support against the dollar and there was a firmer tone later in the day. Bank of England Governor Bailey stated that the central bank faced its biggest challenge for 25 years and that rising food prices were a major concern while the current high inflation level was a bad position to be in. External MPC member Saunders retreated that he believed there should be a quicker move to a neutral monetary policy stance. Although there was a further decline in money-market pricing Sterling posted net gains later in the day. Brexit concerns eased slightly on Tuesday which eased potential Sterling selling and it edged towards higher against the dollar as risk appetite held steady with the Euro slightly lower.

Key Data

7.00 Claimant Count Change Act. -56.9K Exp. -38.8K Prev. -81.6K

7.00 ILO Unemployment Rate (3M) (Mar) Act. 3.7% Exp. 3.8% Prev. 3.8%

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The Euro was able to secure a net advance in early trading on Monday. ECB council member Villeroy stated that monetary policy expects an active summer and a decisive June meeting. He added that the pace of future developments will depend on actual activity and inflation, but there should be a move at least towards the neutral rate. He added that a Euro that is too weak would go against the price stability objective. He added that the bank will carefully monitor developments in the effective exchange rate as a significant driver of imported inflation. This is potentially important given that central bank has not referred to Euro weakness previously and suggests that recent losses are causing concern.

Key Data

10.00 Gross Domestic Product (QoQ) (Q1) Exp. 0.2% Prev. 0.2%

10.00 Gross Domestic Product (YoY) (Q1) Exp. 5% Prev. 5%

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The New York Empire manufacturing index dipped very sharply to -11.6 for May from 24.6 the previous month and substantially below consensus forecasts of 16. There was also a slump in the new orders and production components into negative territory for the month and unfilled orders increased only marginally. The employment index was slightly stronger on the month while there was an easing in inflation pressures with prices increasing at a slower rate. Despite a slide in current conditions, companies were more optimistic over the outlook with inflation pressures set to ease slightly. The dollar dipped lower in an immediate response, although risk appetite tended to dip again after the New York open.

Key Data 

13.30 Retail Sales (MoM) (Apr) Exp. 0.7% Prev. 0.5%
13.30 Retail Sales Control Group (Apr) Exp. 0.5% Prev. -0.1%
19.00 Jerome Powell Speech