Article / 14 September 2016 at 5:05 GMT

3 Numbers: UK jobless rate belies Brexit fears

editor/analyst /
United States
  • The UK’s labour market report for August - what signs of post-Brexit stress?
  • Eurozone industrial activity is on track to slide in today’s update for July
  • Rumours that the Bank of Japan is planning a new assault on JPY strength

By James Picerno

Britain’s economy is in focus today with the government’s update on unemployment for August. Later, we’ll see the July data for Europe’s industrial activity.

Meantime, traders are anxiously watching USDJPY as speculation sizzles that the Bank of Japan may be planning to announce a new program at next week’s policy meeting to nip the currency’s strength in the bud.

UK: Labour Market Report (0830 GMT) A Brexit blowback for the UK may be lurking still, but recent data suggests that the economy is weathering the politically-induced storm rather well, or at least better than previously expected.

The latest example: last week’s survey numbers that reveal a rebound in last month's hiring.

“The UK jobs market returned to pre-referendum patterns in August as the initial shock of the [Brexit] vote result subsided,” says the chief executive of the Recruitment and Employment Confederation (REC), which co-produces a monthly survey with IHS Markit on labour-market conditions for Britain.

“Permanent hiring returned to growth as employers confirmed appointments that had been on hold or delayed in June and July.”

 Too much ado? While the continent flounders, UK employment appears robust. Photo: iStock

Survey data can be wrong, of course, and so it’s premature to assume that there will be little if any economic price to pay for the UK’s decision in June to leave the European Union.

But if forecasts of a recession look a touch excessive these days, it’s still clear that economic output is slowing.

The pace of growth in Britain’s GDP eased to 0.3% in the three months through August, the slowest in a year, according to the National Institute of Economic and Social Research (NIESR).

But some analysts are wondering if the worst has passed. If so, we may see some evidence in today’s official update on the labour market for August.

Economists are expecting a mixed report. The jobless rate is projected to hold steady at a low 4.9% rate, but the number of newly unemployed workers is on track to rise 1,800, according to’s consensus forecast.

If the claimant count rises, the increase will mark the fifth time in the last six months that layoffs have increased. Then again, if the REC survey is a guide, today’s numbers are on track to deliver an encouraging surprise via a decline in new filings.

Eurozone: Industrial Production (0900 GMT) Industrial activity in the euro area has weakened lately and today’s update for July is expected to show even softer numbers.’s consensus forecast sees the monthly comparison slipping into negative territory again. Following June’s 0.6% rise, output is projected to slump 1% in July. The year-on-year trend is also flashing a warning sign. The crowd’s looking for production to drop 0.8% in annual terms.

Even before we see today's release, it's already clear that the numbers published so far this year show a worrisome pattern of decelerating growth.

Unfortunately, the survey data for Europe’s manufacturing sector suggests the downside bias will endure. The Markit Eurozone Manufacturing PMI ticked down to 51.7 last month, a three-month low and close to the neutral 50 mark that separates growth from contraction.

The weaker momentum in the August survey data implies that that today’s hard numbers on industrial activity are vulnerable to a downside bias. As Markit’s chief economist advised at the beginning of this month: “Eurozone manufacturers reported a wavering performance in August, with signs that growth could slow further in coming months.”

USDJPY The chatter about the possibility of US rate hike at next week’s Federal Reserve policy meeting has intermittently lifted the USD in recent weeks, but it’s not yet clear that the Japanese yen’s bullish run this year is fading.

The technical profile for USDJPY continues to point to lower levels, which is to say a stronger yen against the greenback.

Although the US dollar strengthened against the yen for a week through early September, USDJPY appears to be resuming its downward trend, which has dominated for much of 2016 so far.

A tell-tale sign of reversal is likely to be a rise in USDJPY’s short-term moving averages above its longer-term counterparts. At the moment, however, the downside bias remains intact via the 50 day moving average holding comfortably below the 100 DMA, which is under the 200 DMA.

But traders are wondering if the Bank of Japan is planning on a new round intervention to reverse the yen’s strength.

Keep in mind that the Bank of Japan has scheduled a policy announcement next Tuesday.

“We don't know what the central bank will announce next week, and most of us are nervous. Most investors do not want to take positions now,” an equity strategist at Nissay Asset Management told Reuters earlier this week.

Meantime, forex inertia prevails. The question is whether the BoJ has had enough and is poised to unleash a new wave of resistance to USDJPY’s downside momentum?

-- Edited by Adam Courtenay

James Picerno
is is a macro analyst/editor at Follow xxx or post your comment below to engage with Saxo Bank's social trading platform.


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