US Dollar gains on soft UK wage data
Daily Currency Update
The comes under pressure against the US Dollar on Tuesday, moving higher into the 1.22 level, heading into Tuesday's UK wages and US Retail Sales release. Besides the modest rebound in the pound on Monday, investors remain cautious while the currency pair is down over 7% from 2023's peaks of 1.31.
UK wage inflation in the United Kingdom released by the Office of National Statistics which is measured by the difference and change in the Average Earnings Excluding Bonus, came in at 7.8% in August, compared to a 7.9% increase confirmed in July. Average earnings decelerated to 8.1% during the same period slightly weaker than the anticipated reading of 8.3% whereas the prior month's pay growth came in at 8.5%.
Monday presented the Rightmove House Price Index, which month on month increased to 0.5% in October from the previous 0.4%. Yearly data shows that residential property prices declined by 0.8% compared to the 0.4% decline in the previous release.
Federal Reserve Bank of Philadelphia President Patrick Harker reinforced his view on Monday, providing insight that the central bank should refrain from creating economic pressures in the United States by increasing the cost of borrowing. The comments are seen to reflect negatively on the US Dollar, while the Federal Reserve's position shows a reluctant approach to further rate hikes for the time being, the safe haven currency however continues to benefit from buying flows with rising geopolitical tensions between Israel and Palestine.
The US will see the release of Retail Sales later Tuesday which is expected to decline from 0.6% to 0.3%, if the print released shows an incline, this could prompt fears of interest rate hikes from the Federal Reserve further down the line. Although the US growth figures have slowed down, the figures show they are declining at a slower pace than hoped. This, in turn, is reflected in the Federal Reserve's positioning in keeping rates higher for longer, putting off the idea of any rate cuts for a longer duration.
Key Movers
The market remains cautious with the deepening Israel and Hamas war where ground assault is expected to be carried out in Gaza heightening the conflict. Investors keep a close watch on US President Joe Biden’s visit to Israel in the critical moments as he plans to demonstrate support for the country.US Retail Sales will be in the centre stage of data released on Tuesday followed by Industrial Production the NAHB Index and the Monthly Budget Statement. GBP/USD investors will watch for changes in the data for further direction with how the currency reacts.
Expected Ranges
- GBP/USD: 1.2164 - 1.2216 ▼
- GBP/EUR: 1.1539 - 1.1556 ▼
- GBP/AUD: 1.9145 - 1.9279 ▼
- EUR/USD: 1.0534 - 1.0560 ▼