UK weekly wages reach their highest level since March 2008
Wednesday 19 February, 2020
Daily Currency UpdateGBP - British PoundThe Pound marched higher during Tuesday's trade following the release of the average earnings index and unemployment rate. The wage index reached its highest levels since before the financial crisis and employment rose by 180,000 to another record high of 32.93 million, while unemployment stayed at 1.29 million. The headline grabbing figure showed that weekly pay reached £512 in the three months to December, which - adjusting for inflation - is the highest since March 2008. The news was welcomed with open arms for Sterling traders as this just may prevent the Bank Of England from cutting rates at its March 26th meeting and therefore could allow the Pound to drive higher from here. Cable charged back through the 1.30 handle touching a high of 1.3040, this morning we have seen the price retreat back down to 1.30 as investors gear up for today's CPI release. GBP/EUR also pushed back through the 1.20 handle, charging to a high of 1.2058, a level last seen back on the 13th December. As mentioned above all eyes turn towards the CPI release at 9.30am this morning. Markets anticipate a slight recovery in headline CPI (YoY) figure to 1.6% from 1.3%, lagging behind BOE’s 1.8% forecast. UK politics and Brexit will still have a part to play in the Pound's mood as well. Yesterday the newly appointed Chancellor, Rishi Sunak confirmed the budget will go ahead on the 11th March. Elsewhere, the EU Brexit negotiator Michel Barnier again acted as the tough teacher and poured cold water on the UK’s call for Canada-style trade deal.
Key MoversThe Euro witnessed another worrying release on Tuesday, this coming from the German ZEW sentiment. The figure decreased sharply in February, falling 18.0 points to a new reading of 8.7 points. The downturn was largely down to concern for the German economy and the effects of the coronavirus. EUR/USD fell below the 1.08 handle following the release, a support level that has not been broken since April 2017. There’s little in the way of economic data for the single currency today so wider market sentiment will be the driver for this pair today.Not much to report on across the Pond over the last 24 hours. Markets will be keen to see the latest FOMC meeting minutes released later this evening along with PPI releases. The Fed left rates unchanged at its recent meeting and made only subtle changes to the outlook but it will be good to hear their view on the coronavirus, inflation, growth, and more. We did hear from Robert Kaplan, President of the Dallas branch of the Federal Reserve on Tuesday. He simply re-affirmed the bank’s wait and see approach so failed to really move the Dollar. During the Asian session there has been an element of ‘risk on’ trading, largely helped by a slowdown in the number of new coronavirus cases in China’s Hubei province, the epicentre. AUD/USD broke back above the 0.67 handle and NZD/USD was spurred on by the RBNZ’s governors comments. The head of the Reserve Bank of New Zealand, Adrian Orr said that both the economy and monetary policy are in a good position.
- GBP/USD: 1.2980 - 1.3050 ▲
- GBP/EUR: 1.1980 - 1.2080 ▲
- GBP/AUD: 1.9320 - 1.9490 ▼
- GBP/NZD: 2.0250 - 2.0390 ▼