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Sterling (GBP) Holds Above Lows as UK Wage Growth Accelerates

Published: 13 Dec at 5 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, Germany,

Pound Sterling (GBP)
Some better-than-expected UK wage growth data on Wednesday helped the Pound to recover from its worst levels against some major currency rivals throughout the day, even though analysts were overall unimpressed with the job market report.

Britain’s average earnings excluding bonuses came in at 2.3%, above the expected 2.2%. The figure including bonuses rose to 2.5% as forecast, but the previous figure was revised higher from 2.2% to 2.3%.

However, October’s employment stats were disappointing. Employment saw a bigger-than-expected drop in the three months into October, and was the second consecutive print to show a drop in employment.

Jobless claims were also worse-than-expected in November’s print, indicating to some analysts that this negative employment trend might continue.

Overall though, markets hope for this week’s higher wage growth and inflation stats to put some pressure on the Bank of England (BoE). The bank will hold its December policy decision on Thursday.

Euro (EUR)
The Pound to Euro exchange rate recovered most of its weekly losses on Wednesday, as Pound investors reacted to higher-than-expected wage results while the Euro failed to benefit from the day’s Eurozone data.

Germany’s final November inflation results met expectations, coming in at 0.3% month-on-month and 1.8% year-on-year.

The Eurozone’s Q3 employment change results came in at 0.4% quarter-on-quarter as expected, and the yearly figure rose from 1.6% to 1.7%. While the bloc’s October industrial production results beat expectations this was not enough to make the Euro more appealing. Euro investors are likely to await Thursday’s European Central Bank (ECB) meeting before making new moves on the currency.

US Dollar (USD)
The Pound to US Dollar exchange rate edged back towards the week’s opening levels on Wednesday, as Sterling was boosted by UK wage stats while US Dollar investors awaited the latest monetary policy decision from the Federal Reserve.

November’s US inflation results weighed slightly on US Dollar demand too, as the yearly core inflation rate slipped to 1.7% rather than remaining at 1.8% as expected.

In its Wednesday evening meeting, the Fed is expected to hike US interest rates for the third time this year. It’s the tone the bank takes on its 2018 outlook that could have a big influence on the strength of the ‘Greenback’.

Australian Dollar (AUD)
The Pound to Australian Dollar exchange rate briefly advanced on Wednesday morning, but the pair trended near weekly lows towards the end of the European session.

Demand for the risky Australian Dollar was boosted by strong Australian consumer confidence data on Wednesday, as well as higher risk-appetite in markets. As iron ore is Australia’s most lucrative commodity, its advances since Tuesday have boosted the appeal of the ‘Aussie’.

New Zealand Dollar (NZD)
The Pound to New Zealand Dollar saw similar movement to GBP/AUD on Wednesday, briefly advancing before resuming this week’s downward trend.

The New Zealand Dollar has been appealing to investors since the appointment of Adrian Orr as the next Reserve Bank of New Zealand (RBNZ) on Monday, with investors returning to the ‘Kiwi’ after politically-influenced overselling in October.

On top of this, stronger demand for risk-correlated currencies has boosted market appetite for currencies like the risky New Zealand Dollar.

Canadian Dollar (CAD)
The Pound was able to recover slightly against the Canadian Dollar on Wednesday, as a lack of supportive Canadian data limited ‘Loonie’ demand.

Risk-sentiment failed to support the Canadian Dollar either, as investors widely expect higher interest rates south of Canada’s border in the US. Prices of oil, Canada’s most lucrative commodity, were also slightly lower on Wednesday due to forecasts that non-OPEC oil producers would be ramping up production.
As of Wednesday, 13th December 2017, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.1326, GBP USD exchange rate was 1.3411, GBP AUD exchange rate was 1.7579, GBP NZD exchange rate was 1.9132, and GBP CAD exchange rate was 1.7193.
Patrick James About Author: (289 Posts)Patrick completed his economics degree just as the global financial crisis struck in 2008. In the intervening years Patrick has made his mark, climbing to a prominent position within a large financial services provider. As part of his role Patrick uses his expertise to advise companies of the best ways to safeguard against currency risk.

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