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What’s happening: The British pound gained slightly, after hitting a five-month low against the US dollar on Tuesday.
What happened: Data released on Tuesday showed the UK’s unemployment rate rising more than expected.
Although the British pound advanced versus the US dollar, it pulled back against the euro.
Why it matters: The UK’s unemployment rate rose to 4.2% in the three months to February, from 3.9% in the prior period. The figure also came in higher than market expectations of 4%.
Regular wages, excluding bonuses, rose by 6.0% year-over-year to £633 per week, slowing from the 6.1% surge recorded in the November to January period. The number of payrolled employees in the UK fell by 0.2% to 30.3 million in March, compared to a 18,000 decline in the prior month.
Signs of cooling in the labour market raised prospects of rate cuts by the Bank of England this year. Traders widely expect the BoE to lower rated by around 46 basis points (bps) in 2024, with the first cut projected in August.
Hotter-than-expected inflation data from the US, released last week, has resulted in traders scaling back their projections of a rate cut by the Federal Reserve. Markets now expect the first rate cut in September, versus earlier speculations of June.
Some strength in the US dollar limited the overall gains for the British currency. The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose 0.03% to 106.29.
The GBP/USD forex pair added 0.05% to trade at 1.2431 this morning, after falling to its weakest level since November 16 on Tuesday. The EUR/GBP pair rose 0.04% to 0.855.
What to watch: Investors await the release of inflation rate data from the UK today, which is expected to provide further insights into the BoE’s future monetary policy. The UK’s inflation rate, which fell to 3.4% year-over-year in February, is expected to ease further to 3.1% in March.
Analysts expect core producer prices in the UK to rise 0.2% year-over-year in March, easing from a 0.3% gain in February. The Retail Price Index, which rose to 4.5% year-over-year in February, is projected to decelerate to 4.2% in March.
Context: Shares of Bank of America fell on Tuesday, despite the company reporting better-than-expected quarterly results.
Details: Experiencing a decline in income last quarter, Bank of America kept aside more money to cover credit losses. The bank’s net interest income fell 3% to $14 billion during the quarter. It set aside $1.3 billion in provisions for credit losses, compared to $931 million in the year-ago period.
Bank of America reported quarterly adjusted net income of $7.2 billion, with adjusted earnings of 83 cents per share, higher than the consensus estimates of 77 cents per share. Adjusted revenues contracted by 1.6% year-over-year to $25.98 billion but still topped Wall Street expectations of $25.46 billion.
Sales and trading revenues grew by 2% to $5.2 billion, while investment banking fees surged 35% to $1.6 billion.
Net income for the Consumer Banking segment fell 14.5% year-over-year to $2.66 billion, while Global Wealth and Investment Management’s income gained 9.6% to $1.01 billion in the first quarter. Global Banking’s net income dipped 22.3% to $1.99 billion, while the figure at Global Markets gained 6% to $1.79 billion.
The bank added more than 1.0 million credit card accounts during the latest quarter.
How shares responded: Bank of America’s shares fell 3.5% to close at $34.68 on Tuesday, following the release of quarterly results. The stock has added around 26% over the past six months.
What to watch: Investors will continue monitoring comments from Fed officials for some cues on upcoming rate cuts.
Other Markets: European indices closed lower on Tuesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index down by 1.82%, 1.44%, 1.40% and 1.21%, respectively.
Ukraine’s President Volodymyr Zelenskyy said the country had run out of defensive missiles for protecting the Trypilska thermal power plant, which was attacked by Russian missiles on April 11. The news sent the safe-haven US dollar index slightly higher in forex trading this morning.
Japan posted a trade surplus of ¥366,467 billion in March, versus a year-ago deficit of ¥750,854 billion, lending support to the JPY/USD forex pair.
New Zealand’s annual inflation rate slowed to 4% in the first quarter, from 4.7% in the fourth quarter, which sent the NZD/USD pair higher in forex trading this morning.
Canada’s annual inflation rate accelerated to 2.9% in March, from 2.8% in February. However, the latest reading came almost in-line with the Bank of Canada’s projections of 3% for the first half of the year, which lent support to the CAD/USD forex pair.
The API said that US crude oil stockpiles had risen by 4.090 million barrels in the week ending April 12, after a gain of 3.034 million barrels a week ago, sending the WTI crude oil priced lower this morning.
Turkey’s current account and total vehicles production, South Africa’s inflation rate and retail sales, Eurozone’s consumer price inflation rate and European Council meeting, India’s money supply M3 and total passenger vehicles sales, Brazil’s IBC-Br economic activity index and industrial entrepreneur confidence index, Canada’s foreign investment in securities, US MBA mortgage applications, crude oil inventories, gasoline stocks change, distillate inventories, Fed Beige book, net long-term TIC Flows, net purchases of US treasury bonds and notes, and net treasury international capital flows, Russia’s producer price inflation, as well as China’s foreign direct investment.
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