UK job figures have been more positive than expected this morning, however the Pound can’t seem to find a break as traders start to take a reality check about the long-term global picture.

UK unemployment figures remained strong in May at 3.9% which was better than forecast (4.2%). Furthermore, the number of people claiming unemployment benefits actually dropped by 28K in June from May which was a big improvement on expectations for a jump of 250K new claimants. However, average earnings – a key figure the BoE monitor closely – were down 0.3% which could indicate the potential for disinflation and ultra-loose monetary policy for years to come.

Sterling had been ticking lower overnight (mainly due to risk aversion/Brexit) and these relatively robust job figures have done little to boost the Pound. It’s likely traders are largely ignoring these numbers because of the furlough scheme skewing the data. Therefore, we’re unlikely to get a true picture until it ends later in the year.

In other news, China has shown a huge rebound in economic growth (GDP) in the second quarter by expanding 11.5% quarter-on-quarter (and 3.2% year-on-year). The data points towards a solid post-Covid recovery, however it seems Chinese consumers are yet to get back into the full swing as retail sales figures missed expectations by dropping 1.8% year-on-year. This last data point has implications for the developed world, which has become more reliant on Chinese consumer demand over the years, and has soured global risk sentiment today.

As a result, the Pound has given up most of the gains it had made back over the past couple of days. The EUR/USD has lost a bit of ground but remains close to a 4 month high.

Later today, eyes will switch to the ECB meeting. It’s unlikely they’ll make any changes but the subsequent press conference might give markets some idea on how the ECB perceive the recovery is going. Although it's likely policymakers are in wait-and-see mode, as they wait to see how things develop in Brussels over the weekend with the EU recovery fund discussions.

It continues to feel that we’re going through a bit of a summer lull in the currency markets with no major direction in the rates being realised.