Update: UK Jobs Data Fails to Boost Pound Sterling Exchange Rate Forecast
The Pound to Euro (GBP/EUR) exchange rate plummeted to a three-week low ahead of the release of the UK’s latest employment numbers, and with average earnings remaining well below the rate of inflation, Sterling was unable to recover ground.
If tomorrow’s UK retail sales report shows robust consumer spending, Sterling may be able to claw back some of its recent losses.
Retail sales including auto fuel are believed to have picked up 0.2% on the month in October after dropping -0.8% in September, but consumer spending is also expected to have fallen -0.5% on the year.
It would take surprisingly good results to give the GBP/EUR exchange rate a lift.
GBP Headlines
UK CPI disappoints – Sterling slides vs. Euro.
Pound Euro (GBP/EUR) exchange rate down -70 pips – UK labour data on tap.
Pound US Dollar (GBP/USD) exchange rate rallies – US CPI report on tap.
Oil prices weigh on ‘Loonie’ – UK wage data could weigh on the Pound.
Pound Sterling Exchange Rates Under Pressure as UK CPI Disappoints
With traders extra sensitive to any bearish Pound Sterling signals at the moment, due to the intense pressure on UK Prime Minister Theresa May and fears that Britain’s Brexit negotiations could collapse, the Pound found itself depreciating versus some of the majors even as UK inflation printed at a joint-five-year high.
Sterling slid following October’s consumer price index result, which saw inflation remain at 3.0%, disappointing expectations of 3.1%.
Most sectors actually saw slight decreases in prices last month, but overall the CPI score was supported by a huge 4.1% increase in food and drink prices.
With inflation undershooting market expectations, many analysts warned that price pressures could have peaked.
The impact of last year’s post-Brexit depreciation is one of the main reasons that UK inflation has spiked, but as we move out of the 12 month cycle the impact of the Pound’s slide will start to wane.
If correct, this would probably prove a good thing for the UK economy as lower prices would boost consumer activity.
However, for Sterling the consequences could be less rosy because decelerating price pressures would certainly weaken the case for another Bank of England rate hike any time soon.
Pound to Euro Exchange Rate Softens Ahead of UK Unemployment Report as Inflation Undershoots
The Pound to Euro (GBP/EUR) exchange rate is currently trading close to three-week lows following another downbeat day on the currency markets for Sterling.
UK inflation remained at a five-year high but printed slightly lower than investors had expected yesterday, allowing the single currency to rack up another day of gains.
Data in the Eurozone printed broadly positive with GDP for the third quarter confirmed at 0.6%, industrial production coming in slightly above consensus at 3.3% and economic sentiment improving from 26.7 to 30.9.
We could see GBP/EUR come under further pressure during today’s session if UK average earnings slow from 2.2% to 2.1% as expected. Anything lower would likely signal a significant rally, while a surprise to the upside could give the Pound a leg-up. UK unemployment is tipped to remain at a 42-year low of 4.3%.
Pound to US Dollar (GBP/USD) Exchange Rate Registers Surprise Gains
The US Dollar failed to take advantage of weak sentiment surrounding Sterling yesterday, and GBP/USD actually posted daily gains of around 30 pips.
The market wide weakness in the US Dollar yesterday appeared to represent bearish technical trading conditions, rather than come as a result of any one specific economic or political development.
Having said that, this afternoon’s US CPI report is tipped to show a dip from 2.2% to 2.0% in October, which could heap additional pressure on the Dollar.
But, given the lack of appetite for investing in Sterling at the minute, it would not be out of the question for GBP/USD to fall back during today’s session – regardless of the US CPI print – as investors lock-in profit from yesterday’s gains.
Pound to Canadian Dollar Exchange Ticks Higher as Oil Prices Sink
Demand for the commodity-correlated Canadian Dollar softened yesterday as oil prices slid -2%.
The value of Canada’s most-lucrative export tumbled after the International Energy Agency cut its demand forecast and ratings agency Fitch said that $60-a-barrel ‘may not be sustainable’.
The negative news stream sent crude down to $61.81 per barrel and we could see oil prices weigh further over the ‘Loonie’ over the coming weeks if prices do indeed slide back below the $60 mark.
Pound to Australian Dollar (GBP/AUD) Exchange Rate Could Dip on Slowing Wage Growth
This morning’s UK labour market report could cause the Pound to Australian Dollar exchange rate to soften, if wage growth remains significantly lower than the rate of inflation.
Negative real wage growth has been cited as one of the primary reasons why the UK economy has stuttered since Brexit drove Sterling down and inflation up.
A better-than-anticipated score, on the other hand, could give GBP/AUD a shot in the arm.
Low Unemployment Means Nothing for Pound to New Zealand Dollar Exchange Rate if Wages Remain Soft
An expected joint-42-year low unemployment rate is unlikely to cut the mustard for the Pound this morning.
Ultra-low joblessness is all well and good but if wages remain soft and productivity weak, the chances of the BoE embarking on a serious rate hiking cycle over the next few years looks bleak.
For this reason, the average earnings print will likely become the focal point for Pound to New Zealand Dollar (GBP/NZD) traders during today’s session.
Data Affecting Today’s GBP Exchange Rate Forecast
09:30 GBP ILO Unemployment Rate 3Mths (SEP)
09:30 GBP Average Weekly Earnings (3M/YoY) (SEP)
13:30 USD Consumer Price Index (YoY) (OCT)
13:30 USD Retail Sales Advance (MoM) (OCT)