Data from the UK has helped the pound bounce back, but pessimism seems to be making a return on the markets. An escalating situation in the Middle East is no longer seen as the primary catalyst; doubts surrounding the health of economies, such as China’s, seem to be the main cause.
Data from the UK
Early this morning, the UK released a set of macroeconomic readings from the labor market. The unemployment rate unexpectedly fell from 4.1% to 4%, but the number of unemployment benefit claims rose. The reason for this peculiar combination is that the UK presents its unemployment rate with a significant delay – the current value is for August. There were no surprises in the wage data, with a steady increase of 3.8%. This may appear to be relatively small, but it is important to remember that inflation in the UK recently fell to 2.2%. So this result is clearly above the pace of price increase. The market considered this data favorable for the pound’s exchange rate, and the British currency has been rising since the morning.
Decline in Oil Prices
The recent high levels of crude oil prices were a result of tensions in the Middle East. However, it turned out that the situation there isn’t escalating. Although the region is far from stable, the rise of the commodity was slightly speculative, presuming the involvement of additional actors. A calmer-than-expected weekend and weaker-than-expected data from China had investors wondering not if there are risks, but who will buy all this oil. This leads to reports that Russia, taking advantage of its so-called “shadow fleet”, is doing very well in exporting crude. It’s also worth noting that the current market conditions could soon allow Russia to legally return to the markets at the current prices. There’s not much left to reach the barrier of 60 dollars per barrel, after which they can sell in accordance with the sanctions.
Weak Data from China
Yesterday, we learned about China’s trade exchange data. Analysts expected a rise in imports of 0.9%, which would still be a low level for the Middle Kingdom. They received only 0.3%. Furthermore, exports were supposed to increase by 6% – instead, a meager 2.4% was reported. For China’s economy, the current results can be seen as solid monthly or quarterly reads, but not annual ones. However, it is worth noting that on Sunday, China also released data on price increases. In annual terms, consumer prices rose by 0.4%, while producers decreased by 2.8%. This confirms observations that China’s economy is seriously winded. If a crisis were to occur in China, it could spread much more broadly across the globe, as can be seen in the oil market.
In the macroeconomic data calendar, it is worth paying attention to:
11:00 – Germany – ZEW Index,
14:30 – USA – NY Empire State Index,
14:30 – Canada – Consumer inflation.
Maciej Przygórzewski – Chief Analyst at InternetowyKantor.pl.
Source: https://ceo.com.pl/na-rynki-wraca-pesymizm-47589
