UK Employment Figures to Drive Pound Sterling (GBP) Exchange Rates
The Pound to Euro (GBP/EUR) and Pound to US Dollar (GBP/USD) exchange rates retreated from their best levels on Tuesday despite UK public sector net borrowing coming in much lower-than-forecast.
However, the Pound could push higher if today’s UK employment figures impress.
The unemployment rate is expected to hold at 4.3%, with the nation losing -10k positions. While a surprisingly upbeat employment change number would be moderately Pound-supportive, investors will be really focusing on the UK’s wage data.
Growth in average weekly earnings including bonuses is predicted to remain unchanged at 2.5%, with growth in earnings excluding bonuses remaining at 2.3%.
However, if wage growth actually rises, and moves closer to the current rate of inflation, it would support the argument in favour of the Bank of England (BoE) increasing borrowing costs – sending Sterling broadly higher in the process.
Euro (EUR) Exchange Rates Supported by ZEW Surveys
While a strengthening US Dollar (USD) undermined the Euro (EUR) on Tuesday, the common currency did derive some support from the fact that the ZEW economic sentiment surveys impressed.
The German current situation survey rallied from 89.3 to 95.2, while the nation’s expectations survey improved from 17.4 to 20.4.
The Eurozone expectations index, meanwhile, jumped from 29 to 31.8.
ZEW President Professor Achim Wambach noted: ‘The latest survey results reveal an optimistic outlook for the German economy in the first six months of 2018. With 95.2 out of 100 points, this is the most positive assessment of the current economic situation since the introduction of the survey in December 1991. Private consumption, which was the most important driver of economic growth in 2017, is likely to continue to stimulate growth in the coming six months according to the survey participants. The assessment of the global economic environment in Europe and the USA is also much more favourable than it was at the end of 2017.’
Today’s preliminary services and manufacturing PMIs for the Eurozone could inspire EUR movement in the hours ahead.
US Dollar (USD) Exchange Rates Could Strengthen after Services PMI
Although the US Dollar firmed slightly in response to the end of the US government shutdown, gains were limited – particularly after the Richmond Fed manufacturing index fell by more-than-forecast.
Today’s US services PMI could offer the Pound some respite if the gauge of output for the nation’s services sector rises from 53.7 to 54.4 as anticipated, but as the manufacturing equivalent is expected to decline, it may temper the impact of a positive services report.
Existing home sales are also believed to have fallen.
Canadian Dollar (CAD) Exchange Rates React to Trade Agreement
Although concerns about the collapse of the North American Free Trade Agreement (NAFTA) persist, Canadian Dollar (CAD) exchange rates benefited from reports that Canada and ten Asian nations have finalized a new Trans-Pacific Partnership agreement.
With Canadian data lacking today, commodity price movements and NAFTA rumours will be the main cause of CAD fluctuations.
Australian Dollar (AUD) Exchange Rates Firm after Westpac Index
Australian Dollar (AUD) exchange rates were standing firm as European markets opened on Wednesday.
One of the week’s only Australian data releases – the Westpac Leading Index for December – came in at 0.27%. This marked a significant improvement from November’s negatively revised result of -0.05%.
New Zealand Dollar (NZD) Exchange Rates Down after Spending Data
New Zealand Dollar (NZD) exchange rates softened on Wednesday as New Zealand’s credit card spending data revealed a decline in spending in December.
Growth in spending fell from 0.9% to 0.6% on the month and 9.1% to 6.3% on the year.
If today’s inflation data for New Zealand confirms the forecast decline in consumer price pressures, NZD could extend losses.