Pound (GBP) firms on strong wage growth
The pound (GBP) strengthened yesterday after rising UK wage growth dampened bets on a Bank of England (BoE) interest rate cut.
UK earnings growth accelerated from 4.9% to 5.2% in the three months to October, exceeding forecasts of 5%. This could make BoE policymakers nervous about the persistence of inflation in the UK.
The pound has so far had a muted response to this morning’s consumer price index, despite the CPI showing a sharp acceleration in inflation and erasing any lingering bets on a rate cut at tomorrow’s BoE decision. Could Sterling strengthen as the session unfolds?
Euro (EUR) buoyed by upbeat German data
The euro (EUR) initially softened yesterday as the single currency suffered from its negative correlation with a strengthening US dollar (USD).
However, EUR was able to recover later in the session thanks to an unexpected improvement in Germany’s latest economic sentiment index.
Looking ahead, the Eurozone’s final inflation reading for November is due out today. But barring a deviation from the preliminary estimate, it may have little effect on the euro.
US dollar (USD) mixed despite strong sales growth
Trade in the US dollar was mixed yesterday, although it gained ground against some of its weaker rivals thanks to a risk-off market mood and stronger-than-forecast US retail sales growth.
A slight decline in US Treasury yields ahead of the Federal Reserve’s interest rate announcement seemed to pressure USD, limiting its upside potential.
The ‘greenback’ may remain somewhat muted ahead of this evening’s announcement. If the Fed then strikes a hawkish tone when discussing its policy outlook, USD could surge.
Canadian dollar (CAD) falls alongside oil and inflation
The crude-linked Canadian dollar (CAD) fell yesterday as sliding oil prices and an unexpected softening of Canadian inflation both dragged the currency lower.
Amid a lack of Canadian data today, oil prices could once again impact the commodity-linked ‘loonie’. If crude prices rally, CAD could strengthen.
Australian dollar (AUD) slips amid data miss
The Australian dollar (AUD) stumbled overnight as Westpac’s latest leading index missed forecasts, pointing to a slower pace of economic activity in November than expected.
New Zealand dollar (NZD) drops despite rising consumer confidence
The New Zealand dollar (NZD) also dropped overnight, despite stronger-than-forecast New Zealand consumer confidence, amid a gloomy market mood.
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