GBP/USD eyes UK wage growth

GBP/USD consolidates around 1.2760 on a softer US Dollar, focus on UK labor data

The GBP/USD treads water near 1.2760 during the European session on Monday, recovering intraday losses as the US Dollar (USD) loses ground on the weaker US bond yields, coupled with the softer Producer Price Index (PPI) data from United States (US). The heightened tension in the Middle East has balanced the risk-on sentiment, particularly following military attacks on Iran-led Houthi targets, conducted by the United States (US) and the United Kingdom (UK) on Friday. This geopolitical development has influenced both the USD’s strength and the overall sentiment in the GBP/USD pair.

The US Dollar Index (DXY) trims its intraday gains due to the decline in the US Treasury yields. The 2-year and 10-year yields on US bond coupons stand lower at 4.14% and 3.94%, respectively, by the press time. Read more…

GBP/USD eyes UK wage growth

The UK will release employment data on Tuesday and the spotlight will be on wage growth. Over the past few months, wages have been falling and the Bank of England would like to see that trend continue as wages have been driving inflation. Average earnings including bonuses dropped to 7.2% in the three months to September, down from 7.7% in the previous release. The market estimate stands at 6.8% for the three months to October.

The UK economy is in trouble, although there was some good news on Friday, as November GDP rebounded with a gain of 0.3% m/m after a 0.3% decline in October. Retail sales drove the gain as shoppers took advantage of Black Friday sales late in November. Still, the probability of a recession, which is defined as two consecutive quarters of negative growth, remains high. The economy declined by 0.1% in the third quarter and a fourth quarter of negative growth would mean that the economy is technically in a recession. Even if a recession is avoided, the economy has flatlined and isn’t showing any growth. Read more…

Pound Sterling slides amid caution ahead of UK labor market data

The Pound Sterling (GBP) faces sell-off ahead of the United Kingdom labor market data for three-months ending November, which will be published on Tuesday. Investors are anticipating a sharp decline in the wage growth and see labor market conditions cooling further due to higher interest rates by the Bank of England (BoE) and deepening cost-of-living crisis amid stubborn consumer inflation.

Soft wage growth data would improve progress in inflation returning towards 2% as lower earnings will eventually result in a decline in households’ spending power. Stubbornly higher wage growth has remained a major booster of sticky consumer price inflation and a decline in the same will provide more relief to BoE policymakers. Read more…