UK pay growth slows, employee numbers fall
Daily Currency Update
Official figures released today show that annual wage growth in the UK, excluding bonuses, rose slightly more than expected to 5.0% in the three months leading to May. Additionally, a previously reported sharp decline in employee numbers was revised to reflect a less severe drop. This data indicates that while the UK labour market is continuing to cool, the slowdown may be occurring at a more gradual pace than anticipated by the Bank of England. Economists had forecast that regular pay growth would ease to 4.9%, down from the previously reported 5.2% for the three months leading to April.Key Movers
The British pound (Cable) has weakened as the US dollar strengthens, driven by rising expectations that the Federal Reserve will keep interest rates steady (4.25%–4.5%) at its July meeting. This outlook follows hotter-than-expected U.S. inflation data for June.Key Fed officials, including Dallas Fed President Lorie Logan and New York Fed President John Williams, signaled a cautious approach, suggesting rates should remain unchanged for now to maintain inflation control.
June’s U.S. Producer Price Index (PPI) came in flat at 0%, below the expected 0.2% increase. Core PPI also dropped to 0.0% YoY, much softer than the forecasted 2.7%. This weak inflation data caused notable market reactions:
- Cable (GBP/USD) fell by 0.9%
- EUR/USD dropped by nearly 0.6%
Political pressure emerged as President Trump reportedly considered firing Fed Chair Jerome Powell.
Upcoming Key U.S. Data today (due at 1:30 PM):
- Core Retail Sales m/m: Forecast 0.3%
- Retail Sales m/m: Forecast 0.1%
- Unemployment Claims: Forecast 233K
- Philly Fed Manufacturing Index: Forecast -1.2
Expected Ranges
- GBP/USD: 1.3374 - 1.3427 ▲
- GBP/EUR: 1.1520 - 1.1564 ▲
- GBP/AUD: 2.0532 - 2.0682 ▲
- EUR/USD: 1.1574 - 1.1646 ▲