The Great British Pound lost over 1% yesterday against the Greenback falling from levels of 1.3269 down to 1.3069 before gapping up to 1.3150 on the back of reports Tory rebels were being threatened with a general election if they defeat the government of a new clause. However, the government has managed to narrowly avoid a defeat on the amendment to the Trade Bill. This clause would have required the UK Government to make it a negotiating objective to establish a free trade area for goods with the EU or otherwise to enable the UK's participation in a customs union with the EU.
Data was pretty much shrugged off as UK politics took centre stage, UK wage growth slid to its lowest rate in six months, despite record numbers of people in work across the country. Average Hourly Earnings rose by 2.5% on the year in three months to May. The data mounts pressure on the Bank of England to hold off on raising rates as early as August. The disappointing figures for pay growth came despite unemployment remaining at 4.2%, which was the joint lowest level since May 1975.
Looking ahead, economic data today we see the release of UK inflation report. Britain’s Consumer Price Index has been falling of late, contributing to the decision not to raise rates in May. Annual headline CPI fell to 2.4% in May and is now projected to rise to 2.6%. Core CPI is expected to remain stable at 2.1%. The Retail Price Index (RPI) which is also eyed, carries expectations for an increase from 3.3% to 3.5% y/y. Contrary to the US, headline CPI tends to have the most significant impact.
We also see the CB Leading Index which is the Conference Board’s composite indicator, it showed a monthly drop of 0.2% last time, causing some worries. We could see a recovery now.
First line of support at 1.3100 followed by 1.3049, on the upside, resistance at 1.3155 and 1.3200