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UK jobs data, FOMC rate decision set to spark volatility

business-articlesUK jobs data, FOMC rate decision set to spark volatility
  • Pound static before jobs data
  • Will the FOMC hike US interest rates?
  • Australian employment figures ahead
UK wage growth to edge closer to inflation?

The pound was holding steady ahead of the release of the UK’s latest labour report.

Sterling is expected to see some gains this morning with the UK’s unemployment rate forecast to have fallen from 4.3% to 4.2% at the start of the fourth quarter.

However the focus is likely to be the accompanying wage growth figures, with movement in the GBP exchange rate likely to be dependent on an expected uptick in average earnings.

Economists currently forecast that wage growth will have pushed up from 2.2% to 2.5% in October, helping to close the pay gap between average earnings and inflation.

However with inflation having unexpectedly risen to a new five-year high of 3.1% in November, wages failing to meet expectations would cause the pay squeeze to intensify – an outcome that could leave the pound tumbling.   
FOMC rate decision could push USD higher

The main focus for investors today is likely to be the Federal Reserve’s rate decision later this evening, with the decision likely to have an impact that ripples across the entire currency market.

Economists expect the FOMC to vote to raise interest rates to 1.5% in December, delivering on its promise to hike rates three times in 2017.

However, with the odds of a December rate hike having held at over 90% for months now, most investors are likely to have already priced in the move, possibly muting the US dollar’s gains.

Instead, movement in USD exchange rates is likely to be dictated by the tone of Fed Chair Janet Yellen’s statement.

Markets fear that persistently low US inflation coupled with disappointing wage growth figures in November could cause the Fed to cool its plans for future monetary tightening, with a more dovish outlook likely to weaken the US dollar.

GBP/AUD extends losses before Australian jobs data

The pound hit a seventeen-month high against the Australian dollar last week but was unable to cling to its best levels for long.

The GBP/AUD exchange rate has been sliding since markets opened on Monday, with the pairing shedding around 1% yesterday.

The Australian dollar could keep driving the pound back if tomorrow’s Australian jobs figures show the 19.0k increase in employment forecast by economists.

The nation’s unemployment rate is expected to hold steady at 5.4%.

Australia’s consumer inflation expectation figure and high impact reports from China (the nation’s retail sales and industrial production stats) are also likely to have an impact on Australian dollar exchange rates.
 
Upcoming Data

Wednesday, 13th December 2017
07:00              EUR German CPI
09:30               UK Employment change
09:30               UK Average weekly earnings
13:30               US Consumer Price Index (NOV)
19:00               FOMC rate decision
 
Thursday, 14th December 2017
00:00              AUD consumer inflation expectation 
00:30               AUD employment change 
12:00               GBP Bank of England rate decision 
12:45               European Central Bank rate decision
13:30               USD advance retail sales 
 
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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