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What’s happening: The British Pound moved lower versus the US dollar as investors assessed the latest economic reports.
What happened: Another round of data from the UK lowered speculations of the Bank of England cutting interest rates at its August meeting.
The sterling also edged lower against the euro on Thursday, following the release of the European Central Bank’s interest rate decision.
Why it matters: Official data from the UK showed average weekly earnings, excluding bonus payment, increasing by 5.7% year-over-year during the three months to end-May. The data, which is a key measure for the BoE, came in-line with market expectations but was below the 6% recorded for the prior three months.
The number of people working increased by 19,000 in the same three months, compared to a 139,000 decline in the prior period. UK’s unemployment rate remained unchanged at 4.4%, in-line with market estimates.
Data released on Wednesday had showed service-sector inflation remaining at 5.7% and annual inflation rate at 2% for June. Factory gate prices of goods produced by manufacturers increased 1.4% year-over-year in June, versus a 1.7% rise in the prior month.
Recent data also signalled a pickup in economic growth. Total British gross domestic product expanded by 0.4% in May, following zero growth in the prior month, and came in higher than market expectations of 0.2%.
The data lowered speculations of the BoE cutting its benchmark interest rates on August 1. Markets still expect the central bank to lower rates from 5.25% to about 4.60% by the end of the year.
Strength in the US dollar also exerted pressure on the GBP/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained around 0.4% to 104.17 on Thursday.
The GBP/USD forex pair declined more than 0.5% to 1.2943, after hitting a session high of 1.30125 before the release of wage growth figures. The sterling had topped the 1.30 level versus the greenback for the first time since July 2023 on Wednesday.
The pound has gained around 2% year-to-date versus the US dollar, making it the top-performing major currency of the year, following a 5.3% surge in the previous year.
The EUR/GBP forex pair added around 0.1% to reach 0.8420 on Thursday, with the British currency adding around 3% against the euro this year. The European Central Bank kept its benchmark interest rates unchanged at its recent meeting, in-line with expectations.
London’s FTSE 100 gained 0.21% to close at 8,204.89 on Thursday, after gaining 0.3% in the prior session.
What to watch: Investors await the release of economic reports on retail sales and public sector net borrowing from the UK today. Retail sales in the UK, which surged 2.9% in May, are expected to decline by 0.4% in June.
Context: Shares of Netflix edged lower during Thursday’s after-hours session, despite the company posted better-than-expected second-quarter results.
Details: The streaming video pioneer added more than 8 million members during the second quarter, benefitting from the crackdown on password sharing and introduction of a less-costly plan. Seeing saturation in the US, the company is looking to stop regularly disclosing new member additions from next year.
Netflix closed the second quarter with 277.65 million paid members, while adding 8.05 million paid members during the same period. Its paid members surged 16.5% year-over-year, topping analyst estimates of 5 million, but came in lower than the gain of 9.33 million members recorded in the prior quarter. Its ad-supported membership increased 34% during the latest quarter.
Netflix said overall quarterly revenue rose 16.8% year-over-year to $9.56 billion, topping consensus estimates of $9.53 billion. The company reported earnings of $4.88 per share, beating Wall Street expectations of $4.75 per share.
“The challenge for so many of our competitors is that while they are investing heavily in premium content, it’s generating relatively small viewing on their streaming services,” Netflix said.
Management guided to earnings of $5.10 per share and revenue of $9.73 billion for the third quarter, representing a 13.9% year-over-year gain. The company said it sees net paid subscriber adds for the quarter to be lower than the prior year.
How shares responded: Netflix’s shares slipped 0.1% to $642.70 during Thursday’s after-hours trading, following the release of quarterly results. The stock has climbed more than 32% over the past six months.
What to watch: Investors will watch new releases from the company, which are expected to significantly impact its overall results ahead. Netflix will premiere a Squid Game-inspired video game later this year, timed to the launch of the second season of the series.
Other Markets: European indices closed mixed on Thursday, with the DAX 40 and STOXX Europe 600 Index down by 0.45% and 0.16%, respectively, while the FTSE 100 and CAC 40 rose by 0.21% each.
NATO named British official Patrick Turner as the new head of its representation in Ukraine. The news sent the safe-haven US dollar index higher in forex trading this morning.
Japan’s core consumer price index rose by 2.6% year-over-year in June, accelerating from the 2.5% increase recorded in May, which exerted pressure on the JPY/USD forex pair.
Argentina’s economic activity estimator climbed by 2.3% year-over-year in May, compared to a 1.6% contraction in the prior month. The latest reading also topped market estimates of a 2.4% decline and sent the ARS/USD pair higher in forex trading this morning.
Colombia’s leading economic indicator increased by 2.45% year-over-year in May, lending support to the COP/USD forex pair.
The South African Reserve Bank held the repo rate at 8.25% at its July meeting, sending the ZAR/USD pair lower in forex trading this morning.
Germany’s producer price inflation, Eurozone’s current account, Italy’s construction output and current account, Spain’s balance of trade and consumer confidence indicator, India’s foreign exchange reserves, Canada’s retail sales, industrial producer prices and raw materials price index, US Baker Hughes crude oil rigs and Baker Hughes total rigs, China’s foreign direct investment, Turkey’s government debt, as well as Argentina’s leading economic index.
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