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Can UK inflation data boost pound?

business-articlesCan UK inflation data boost pound?
  • Weaker UK wage data limited pound strength
  • US dollar vulnerable to softer retail sales
  • Australian dollar struggles to shrug off risk aversion
 
Pound set for volatility on higher UK inflation
 
After the disappointing nature of yesterday’s average weekly earnings data the pound looks vulnerable ahead of the latest UK consumer price index.
 
As forecasts point towards inflation rising from 2.4% to 2.5% on the year in July, domestic wages are likely to come under further pressure.
 
This could drive GBP exchange rates lower this morning as lacklustre wage growth limits the confidence of UK consumers.
 
However, an uptick in inflation may encourage the pound to strengthen on bets that this will increase Bank of England (BoE) hawkishness.
 
 
Weakening retail sales to dent US dollar demand
 
The US dollar’s bullish run has softened since the start of the week and USD exchange rates may come under pressure today.
 
This afternoon’s advance retail sales data could undermine the appeal of the US dollar, with investors expecting to see a dip in growth on the month.
 
Weakening sales would suggest that confidence within the world’s largest economy is easing, in part thanks to the US-China trade spat.
 
Even so, as long as market risk aversion remains elevated USD exchange rate losses will be limited.
 
Australian dollar looks for support from labour market data
 
Confidence in the Australian dollar could pick up tonight if July’s Australian labour market data proves encouraging.
 
However, with no change expected from the headline unemployment rate AUD exchange rates may find limited support on the back of the data.
 
Unless the domestic labour market shows fresh signs of tightening, demand for the Australian dollar is likely to remain muted.
 
Another significant increase in full time employment, though, may help AUD exchange rates shake off wider market jitters.
 
 
Upcoming Data
 
Wednesday, 15th August 2018
09:30 GBP Consumer Price Index
13:30 USD Advance Retail Sales
 
Thursday, 16th August 2018
02:30 AUD Unemployment Rate
 
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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