GERMAN DATA: Labour Market Weighed Down By Industry In Q2, Services Solid
Aug-15 09:12
The German labour market deterioration continued in Q2 according to detailed quarterly data released today. Employment declined by 7k on a sequential basis (0.0%), vs a slight incline of 17k in Q1 (also 0.0%).
- The industrial sector saw its eighth consecutive quarter of declining employment, at -0.53% Q/Q (Q1's -0.62% was the weakest since the pandemic).
- Employment in the services sector continued to increase albeit still only modestly (0.13% Q/Q vs 0.17% Q1). As in previous quarters, this was driven by the "public service providers, education, health" cluster rising by 0.49% (vs 0.47% Q1). However, also most other services subsectors reported employment gains this time.
- The data adds some context to the -0.1% Q/Q Q2 GDP decline after 0.3% in Q1, implying weaker productivity last quarter on a per employee comparison.
- Average hours worked per employee and total hours worked were both -0.5% Y/Y in Q2 reflecting no change in employment over the year. Against the working-day adjusted Y/Y GDP gain of 0.3% in Q2, this implies higher productivity on a yearly comparison.
- The number of self-employed persons declined in Q2, continuing its long-term downtrend, at -1.2% Y/Y.
From a long-term structural perspective, the composition of the German labour market continues to shift, with the public/health/education cluster gaining greater prevalence in employment (see bottom chart).
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GILT AUCTION RESULTS: 4.50% Sep-34 Gilt Tender Result
Jul-16 09:03
| 4.50% Sep-34 Gilt | |
| Amount | GBP1.50bln |
| Avg yield | 4.547% |
| Bid-to-cover | 3.32x |
| Tail | 0.4bp |
| Avg price | 99.600 |
| Low price | 99.573 |
| Pre-auction mid | 99.571 |
FOREX: Greenback Consolidating Tuesday Advance, GBP Contained Post CPI
Jul-16 08:57
- G10 currency ranges have been very contained early Wednesday, allowing the US dollar to consolidate the prior day’s broad-based advance following the release of US inflation figures. The recent USD index recovery has now extended to around 2.3% from cycle lows printed on July 01. The rally marks the cleanest evidence yet of a material break of the downtrend posted off the February high, bolstered by a clean break above the 20-day EMA.
- USDJPY moderately extended its significant upswing overnight, printing at the highest level since April 03 at 149.18. Bullish momentum was underpinned by the rising US yields and breaks above the June and May highs likely exacerbated the move. The May high around 148.65 has provided support this morning, keeping a short-term bullish theme prominent.
- the next focus will be on 149.38, the 50.0% retracement of the Jan 10 - Apr 22 bear leg, and 150.49, the Apr 2 high.
- Despite headline and core CPI in the UK surprising to the upside, we think the BOE will largely describe inflation in the August MPR as broadly in line with their forecast. This explains the very limited reaction for GBP this morning, as markets assess the upcoming labour market data on Thursday and bearish technical developments for the pound.
- GBPUSD breached important trendline support below 1.3430 yesterday, drawn from the Jan 13 low. A clear break of the trendline strengthens a bearish threat and exposes 1.3335, the May 20 low.
- The data focus later today will be on US PPI, industrial production and the Fed’s beige book. There are also various FOMC speakers expected.
BONDS: Bonds Off Lows As Technical Supports Hold & Oil Softens
Jul-16 08:52
A downtick in crude oil helps stabilise wider core global FI.
- Technicals also play a part, with gilt futures respecting their early June low (91.16), while TY futures fail to break through Tuesday/overnight lows.
- Benchmark futures trade away from lows on the follow.
