Sterling pares gains after wage growth figures disappoint, what's next?

Author: Justin Low | Category: News

Cable now trading at 1.4340, down from 1.4370 levels

Today is just the first taste of the data points that could potentially derail cable's bid higher after the positive start yesterday.

The key as mentioned before the report is the wages data, and it came in below expectations. And relative to CPI reading, it means that real weekly earnings in the UK is still negative. That's the biggest takeaway for me.

But as mentioned in the report as well, take heed that this data will need to be taken into context relative to the inflation report tomorrow. Headline CPI is expected to come in at +2.7% y/y, while the core reading is expected to inch higher to +2.5% y/y from +2.4% y/y prior.

While the BOE may still raise rates in May regardless of the data points this week, the figures from the inflation report and the labour market report today should continue to paint a picture that we are not likely to see any more rate hikes this year thereafter.

As for levels to watch out for now, there's not much sitting in the way of cable until 1.4300 - but key near-term support levels are only below that, sitting at 1.4280 and 1.4260, followed by the 100-hour MA (red line) at 1.4249.

But expect bids at the figure level to put up some fight in the event of further decline in the pair. Currently offers are building up at 1.4380 and more at 1.4400.

The data release here should at least for now inject nervousness in those who went long to square their positions ahead of the other data points tomorrow and on Thursday.

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