Good morning,

UK inflation still lower than expected

Ahead of the EU referendum, one of the Bank of England’s starkest warnings concerned a crunch on the consumer’s spending power: high inflation, twinned with lower wages and fewer job opportunities. Yesterday’s inflation figures from the UK didn’t support that hypothesis, with both consumer and producer price inflation falling below expectations. Nonetheless, calendar effects primarily concerning oil and energy prices over the next few months should prove supportive of an accelerating inflation profile.

UK unemployment expected to remain unchanged

The jobs market in the UK, if the recent PMI surveys hold up, should also be faring better than expected. Today’s unemployment rate release is expected to hold steady at just below 5%, but with average earnings decelerating slightly. Should the release follow the recent pattern of the UK economy proving stronger in a post-referendum world than expected, this will add more pressure to Theresa May to proceed with invoking article 50 and formally beginning the process of leaving the European Union.

Sterling has come off recent highs since the beginning of the week alongside a broader asset sell-off that’s extended from Asian to European to US equity markets. These moves have come despite central banks from both Japan and the US attempting to reassure markets that stimulus measures are still forthcoming and policy in general will remain very supportive.

Australia should remain the best of a bad bunch

The Aussie dollar wasn’t spared from the broader sell-off yesterday and lost ground against the USD. Tonight’s unemployment figures should be further proof that the Australian economy is one of the more structurally sound economies at present, with 15,000 jobs expected to have been added in the month of August.

Have a great day.