Published: 18/04/2023 By ECAPBritain's unemployment rate rose unexpectedly in the three months to February but pay growth stayed higher than forecast, highlighting the issue for the Bank of England as it judges whether to raise interest rates further. The Office for National Statistics said the unemployment rate rose to 3.8% - its highest since the second quarter of 2022 - rather than holding at 3.7%, as forecast by economists in a Reuters poll. Britain’s unemployment rate may still be ultra-low, but with rapidly rising interest rates, slowing growth, sticky inflation, and employers still facing pressure to increase wages amid trickier business conditions, the nation’s labour market is at a turning point.
The Euro began the week on the back foot as European Central Bank policymakers have left the door open to a downshift in the pace of interest rate hikes which might hold back traders from placing aggressive bullish bets around the shared currency. ECB member Martins Kazaks said yesterday that the central bank might opt for a 25-basis points hike at the next meeting in May. Looking forward, Euro traders will pay attention to the Eurozone and Germany’s ZEW Survey data for April as market sentiment dwindles ahead of the data and can allow the bloc’s currency to regain upside momentum. However, major attention will also be given to the risk catalysts and central bank talks for clear directions.
The US dollar slipped lower in early European trade this morning, handing back some of the overnight gains as healthy Chinese growth data boosted risk sentiment. China's post-COVID recovery appears to be firmly on track, after data released earlier showed that the second largest economy in the world expanded 4.5% in the first quarter year-on-year, beating forecasts for 4% growth, and registering a sharp acceleration from the previous quarter’s 2.9% reading. Ultimately, this news has boosted optimism about the global economic recovery, to the detriment of the safe-haven dollar.