Talking Points<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
· AUD wage pressures contained
· <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />UK Unemployment highest since 2001
· EZ Industrial Orders off sharply
· US Empire on tap
UK claimant count actually printed better than expected at 1.2K versus 5K forecast, but cable was pounded nevertheless in early London trade as the ILO unemployment rate hit a decade long high of 5.6% and average earning gains lagged expectations. UK unemployment rate now stands at 5.6% its highest level since April of 2000 while wage growth appears more muted than forecast, rising 3.9% on a year over year basis versus 4.0% projected. Tonights news suggests that the BOE may have gone as far as it can in raising rates to 5.0% and that any further tightening could tip the UK economy into an economic contraction. With wage pressures contained and unemployment rising, currency traders speculated that the pressure on BOE to cease and desist would rise markedly. The pound therefore broke the 1.8900 figure as many of the recent longs - placed on the assumption that UK rates would continue to rise - were liquidated.
Meanwhile in the Eurozone, news that Industrial Orders declined a much sharper than expected -1.0% versus -0.3% forecast helped guide euro below the 1.2800 level once again. The biggest drop occurred in consumer durables suggesting that internal demand in the Eurozone remains weak which bodes poorly for Q4 growth in the region.
Today the US calendar only contains Empire Manufacturing, which, if it prints lower as expected, may help stem some of the slide in the euro and the pound. Overall however, the majors remain trapped in wide ranges with EUR/USD oscillating between 1.2700-1.2900 as for the time being, neither US nor EZ economic data provide any degree of confidence to market participants.
