The Pound is likely to see a very uncertain period in the run up to November after UK unemployment fell by 52,000 in the three months to August leaving the headline figure steady at 4.3%.
This table shows the market movements for a number of GBP currency pairings yesterday:
|Currency Pair||% Change||Difference on £200,000|
A strong number like this would normally be seen as good news for the UK and hence the Pound if it wasn’t for the weak wage growth that the British labour market is currently experiencing.
Whilst unemployment remains at its lowest level since 1975 wage growth is still lagging behind inflation which means real wages are still shrinking.
The Resolution Foundation was quick to report that the average UK pay is now at 2006 levels.
The wage growth numbers are keenly monitored by the Bank of England and are given major consideration when they are discussing interest rates.
A Foreign Currency Direct poll sees the trading floor evenly split on whether or not the Bank of England will raise rates in November.
The Deputy Governor of the Bank of England Sir Dave Ramsden cited this week that wage growth would need to rise before he would look to raise interest rates. He also signalled that he is not in the majority of those wanting to hike rates, which has put pressure on the price of Sterling.
Another policy maker, Silvana Tenreyro has also signalled some reluctance to an interest rate hike after stating that raising rates too soon would be a costly mistake. The softer data could suggest the odds of a November hike are slipping and this is seeing the Pound come off those recent highs.
UK retail sales are released this morning at 09:30 and can always create some volatility for the Pound. Expectation is for sharp fall to -0.2% in September which could prove negative for Sterling exchange rates. With London property prices believed to have fallen by up to 20% there are some thin cracks emerging in the British economy.
Nationwide house price data next week should give some more clues as to the health of the property market whilst Gross Domestic Product (GDP) numbers and mortgage approvals will also be seen as good barometers as to how well Britain is performing in this Brexit limbo period. Meanwhile Theresa May heads to Brussels today for an EU summit where she will try to break the Brexit deadlock.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me at firstname.lastname@example.org.
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