Global macro overview for 17/08/2017

Global macro overview for 17/08/2017:

A set of quite upbeat data from the UK has been released recently. The UK unemployment declined to 4.4% from 4.5% in June and this was the lowest unemployment rate since 1975. The employment increased by 125,000 in the last 3 months and by 338,000 over the year with the employment rate at a record high of 75.1% from 74.9% in the previous month. The jobless claimant count declined 4,200 in July, which was better than market participants expectations of 7,200 increase. The biggest surprise, however, came from wages as the headline year-on-year growth rate strengthened to 2.1% from an upwardly-revised 1.9% in the previous month.

The report from the British labour market was a big surprise. Actually, there was nothing to pin down, all the figures were better than expected. In spite of everything, the better data coming from the British economy seems to calm the biggest pessimists announcing stagflation (simultaneous rise in inflation and a slowdown in economic growth). The data will improve the confidence surrounding the UK economic outlook with market sentiment edging back towards the potential for higher rates. Nevertheless, the Bank of England policymakers might not be that optimistic as only a sustained improvement in economic data would change the point of view of the BoE officials and trigger the interest rate hike this year. The main obstacle, the lower than projected inflation readings, is still on the table and it still looks like the BoE will prefer the wait-and-see approach before committing to present any hawkish point of view regarding a possible interest rate hike.

Let's now take a look at the EUR/GBP technical picture on the H4 time frame. The market is trading relatively close to the swing high at the level of 0.9268 in overbought conditions. Moreover, there is a clear bearish divergence between the price and the momentum oscillator and the price is trading inside of the Ending Diagonal pattern. All these clues are pointing for a possible test of the level of 0.9088 and lower if the UK data are better than expected. The key techcnail support is still at the level of 0.9006.

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