UK unemployment rate comes in lower than expected

The UK’s employment data for August was released earlier on today. Our interest is in the unemployment rate which came in at 4.7% which could aid the GBP

MORNING OVERVIEW

The UK’s employment data was released today, which could provide support for the sterling as the data tended to showcase a resilient labour market. Over in Europe, of interest will be the ZEW figures which are due out during today’s European trading session.

MARKET SNAPSHOT

KEY MARKET THEMES

01 — UK Unemployment rate comes in lower than expected

UK unemployment fell to 4.7% in the latest reading, coming in below market expectations of 4.9% and the prior reading of 4.9%. The stronger-than-expected labour data, points to a more resilient jobs market, which could reduce the pressure on the Bank of England to ease policy and may keep rate cut expectations in check. This is supportive for sterling, as a firmer labor market and a less dovish BoE outlook could provide support for the sterling.

Market implication (EUR): Bearish

02 — US stocks rebound

US stocks attempted a rebound yesterday, with all three major indexes edging higher. Even so, the bullish case for US equities remains unconvincing for now. Easing hawkish expectations for the Fed could improve market sentiment and lift stocks, while concerns over heavily indebted AI companies could trigger a risk-off move and weigh on them. Attention will also turn to earnings season, with SpaceX and Netflix due to report.

Market implication (CNH): Bullish

03 — Oil prices remain elevated

The bulls appear to still be in control of oil prices beneath the surface, despite relatively calm trading yesterday and during today’s Asian session. Markets remain wary of possible Houthi strikes on Saudi infrastructure and on vessels in the Gulf region, which keeps supply worries elevated. Further escalation of tensions could push oil prices higher, while a de-escalation could ease them.

Market implication (OIL) : Bullish

WHAT MATTERS TODAY

Germany’s ZEW economic sentiment figure October

Time GMT+2): 12:00

Expected: 30.2
Previous: 34.7

Potential market reaction:
Could weaken EUR

ASSET FOCUS

[OIL , السلع]

Oil prices for the day appear to be moving in a upwards fashion for today. Overall, we would opt for a bullish outlook for the commodity’s price and supporting our case is the RSI indicator below our chart which currently registers a figure close to 70 implying a bullish market sentiment, as well as our MACD indicator. For our bullish outlook to be maintained we would require a break above our 99.30 (R1) resistance level, with the next possible target for the bulls being our 105.60 (R2) resistance line. On the other hand, for a sideways bias we would require the commodity’s price to remain confined between our 91.25 (S1) support level and our 99.30 (R1) resistance line. Lastly, for a bearish outlook, we would require a break below our 91.25 (S1) support level with the next possible target for the bears being the 84.75 (S2) support line.

KEY LEVELS

• Resistance (R1): 99.30
• Resistance (R2): 105.60
• Support (S1): 91.25
• Support (S2): 84.75

Technical View: Bullish

CROSS-ASSET VIEW

TRADING SPHERE VIEW

Bearish for EUR

Our base case:
We wouldn’t be surprised to see political instability in France continuing, as the situation continues to develop following the riots in France over the weekend. In turn the instability and concern may spill over into the FX markets, which may influence the EUR.  

What would change our view:
Easing tensions in France.

RISKS TO THE VIEW

Contagion effect resulting in France’s fiscal ambitions being pushed back

France is currently facing a variety of issues, including concerns over its economy, which may weigh on the EUR in the future.

TODAY’S WATCHLIST

01 Germany’s ZEW figures