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Sterling slips as wage growth misses target

By Jake Trask

GBP/USD fell back yesterday as UK wage growth figures missed target. The Average Earnings Index which includes bonus payments saw a 2.4% rise 3m/y when a hold at the previous months 2.5% was expected. The data (which in theory fuels overall inflation) is closely watched by the Bank of England so the shortfall will have been noted by members of the Banks Monetary Policy Committee. Today sees CPI numbers released by the Office for National Statistics with a small uptick from 2.4% to 2.5% predicted. With the markets focus slowly withdrawing from Turkey there is likely to some volatility should the data miss or beat estimates. As mentioned, the immediate panic from Turkey seems to be subsiding, although the situation is far from illustrating this is USD/TRY falling back towards the 6.0 handle after briefly breaching 7.0 early on Monday. Cable trades at 1.2725 .

The greenback is higher against most of its trading peers this morning as concerns linger over the economic picture in Turkey. Despite the Lira clawing back some of its losses there are still grave concerns over international loans made to the countries institutions. As a result EUR/USD continues to remain under pressure falling to 1.1340 this morning as investors look to the safety of the dollar. This afternoon we have Retail Sales numbers from the States with an overall increase of 0.1% expected m/m. After falling back below 111 USD/JPY has retaken the big number to currently sit at 111.30. .

There was some solid data from the Eurozone yesterday as the second estimate of GDP for the second quarter was revised higher to 0.4% from an initial reading of 0.3%. At the same time the German ZEW Economic Sentiment survey printed -13.7 far better than the -20.1 priced in and streets ahead of last month’s -24.7. Despite this strong pair of numbers the euro is lower this morning as market focus remains stuck on Turkey and the exposure EZ banks have to the beleaguered country. An announcement of tariffs being raised on US imports of cars, alcoholic drinks and leaf tobacco will do little to quell the situation however it appears the euro is the one suffering the most pain as a result. GBP/EUR is up to 1.1225 as France, Italy and some other EZ countries enjoy a public holiday for Assumption Day.

Like the euro, the aussie has been hit hard by events from Turkey leading markets to shun risk assets. The aussie however has been suffering from poor data emanating from China too, as its biggest trading partner showed poor Fixed Asset Investment and Industrial Production numbers yesterday. The miss for both the closely followed gauges could be a very early indication that the Chinese economy is beginning to slow on the back of the tariffs imposed by US President, Donald Trump earlier this year. AUD/USD came close to falling through the .72 handle for the first time since Jan 17 during the Asian session and currently trades at .7225. GBP/AUD currently trades at 1.7610.

USD/CAD has fallen back below 1.31 during the Asian session as broad dollar strength is seen in the market. Fridays CPI figure from Ottawa is this week’s one data-set of note. The closely followed reading is expected to show another 0.1% move higher m/m.

Like other commodity currencies, the kiwi has been suffering on the back of the Turkish turmoil and the weak figures coming from China yesterday. NZD/USD is currently trading around the .6550 handle, its lowest level since early 2016. There is no data from NZ for the rest of the week so risk sentiment driven by events at either side of Asia will likely drive the local dollars direction. GBP/NZD trades at 1.9410.