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Pound poised to extend gains if UK wage growth accelerates

business-articlesPound poised to extend gains if UK wage growth accelerates
  • Pound bounces back from multi-year lows in spite of political anxiety
  • Weakening German economic confidence set to drag on euro
  • US dollar looks for support from consumer price index
 
Rising wage growth set to boost GBP
 
The pound could continue yesterday’s recovery if June’s average weekly earnings figure accelerates as forecast.
 
Stronger levels of wage growth could translate into higher levels of consumer spending, offering a boost to the UK economy.
 
After the contraction in the second quarter gross domestic product any signs of domestic resilience could lend the pound support.
 
However, if wage growth stalls this would leave GBP exchange rates exposed to a fresh downtrend.
 
 
Euro vulnerable as German economic sentiment sours
 
EUR exchange rates look set for another day of weakness as forecasts point towards a fresh decline in the German ZEW economic sentiment index.
 
As the headline index is expected to fall from -24.5 to -28 in August worries over the outlook of the German economy are likely to increase.
 
Fresh evidence that the Eurozone’s powerhouse economy is struggling in the face of deteriorating global growth may encourage the euro to trend lower.
 
On the other hand, if the index shows an improvement on the month the single currency could gain some ground.
 
 
Signs of stronger inflation could lift US dollar
 
July’s US consumer price index could lift USD exchange rates today, even though the measure is not the Federal Reserve’s preferred gauge of inflation.
 
As higher levels of inflation would reduce the need for lower interest rates, an improvement could diminish the odds of further monetary loosening in 2019.
 
However, even a strong showing here may not be enough to encourage the Fed to take a more hawkish outlook in the coming months.
 
 
Upcoming Data:
 
Tuesday, 13th August 2019
09:30 GBP Average Weekly Earnings
10:00 EUR German ZEW Economic Sentiment Index
11:00 USD NFIB Small Business Optimism
13:30 USD Consumer Price Index
 
 
 
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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