September UK Jobs And German ZEW Survey

October 14, 2019

By Orbex

There is a substantial amount of market-moving data coming out of Europe tomorrow.

The most important is likely to be employment data from the UK. The rate of job seekers is likely to stay at the lowest since the ’70s.

Half an hour later, we have a big event for the continent, the ZEW Economic Sentiment Survey from Germany. Expectations are for this to slip even further into contraction.

The theme of the day is the potential for currency divergence, which helps us understand long term trends for the euro and pound.


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Is the UK diverging from the eurozone, or is the concern over Brexit leading to economic (and therefore, currency) convergence? Let’s have a look.

Data and Expectations

There are several bits of UK data coming out at the same time. However, it’s usually the Claimant Count Change that moves the market.

The consensus of expectations is that the UK lost a net of 16.6K jobs in September. This would be around half of the 28.2K registered in the prior month. It would also be the lowest number since March of this year, which was supposed to be another Brexit deadline. The number of people seeking benefits has slowly been increasing this year.

Despite rising employment claims, the consensus among economists is that the UK’s employment rate will stay at 3.8%. This appears to be a floor that the rate hasn’t managed to get below since April. This is also well below what most economists agree is the structural level, which would imply increasing labor tightness and higher inflation in the future.

Speaking of which, we also get Average Weekly Earnings. Expectations are for these to have grown by 3.7% in September, a slowing of the pace from 4.0% in the prior month. This is well above the inflation rate and would be expected to nudge the BOE towards keeping interest rates steady.

There are other data points that could also have a minor influence on the pound all happening at the same time. Employment Change is one example of them.

But, right after the data release, traders might want to keep an eye open for BOE Governor Carney’s Speech. He’ll be speaking in front of the Treasury Select Committee on the FSR. And his comments are likely to be relevant to the market if he were to unexpectedly give some change in the BOE’s guidance!

The Germany Effect

A bit later, we get the first survey of German businesses following the ECB’s latest rate cut.

Economic sentiment last month was boosted well above expectations as businesses priced in the potential of monetary policy. But it wasn’t enough to bring the outlook into the positive, and the consensus is for a more bleak outlook

Expectations are for the German ZEW Economic Sentiment Indicator to come in at -33.4, a substantial move back into contraction from -22.5 recorded in the prior month. This is the one that the market focuses on because it’s how businesses see the situation over the next six months. This is a key time period getting through the relatively lower production period in the winter.

We can also expect the German ZEW Economic Situation indicator to decline, but not so much. Projections indicate that it will go down to -23.2 from -19.9 prior. As usual, the current situation is better than the outlook, given the uncertainties in the future.

The ZEW also publishes an Economic Sentiment Indicator for the eurozone. We can also expect this to fall deeper into contraction at -33.0 compared to -22.4 prior. It will mostly be dragged down by poor performance in Germany.

After that, the market would be expected to trade primarily on technicals!

By Orbex