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Pound buoyed as UK workers in line for significant wage rise in 2020

currency-newsPound buoyed as UK workers in line for significant wage rise in 2020
The pound trended higher on New Year’s Eve, bolstered by hopes that a notable bump in minimum wage will help to boost growth in the UK this year.

Sterling is struggling to build on its momentum this morning however, with GBP/EUR subdued at €1.1790, GBP/USD muted at $1.3218, and GBP/CAD rangebound at C$1.7156. GBP/AUD and GBP/NZD are holding steady at AU$1.8881 and NZ$1.9662 respectively.

Looking ahead, will the pound begin 2020 on the back foot following some gloomy PMI figures?

What’s been happening?

The pound closed out 2019 on a high, gaining on Tuesday after Boris Johnson announced UK workers on minimum wage are in line to receive a significant wage increase this year.

Johnson announced that the national living wage, paid to those over 25, will rise by 6.2% in April.

A rise of over four times the rate of inflation, GBP investors hope the bump in wages will help to support economic growth in 2020 by bolstering consumer spending.

Meanwhile, the euro held steady on New Year’s Eve, with a more optimistic outlook for the single currency in 2020 offering some support to EUR exchange rates.

After falling in both 2018 and 2019, analysts are forecasting the euro will fare better in 2020 as the Eurozone economy final starts to turn a corner.

Finally, the US dollar ended the year on a sour note on Tuesday, slipping to a five-month low as a risk-off mood in markets saw investors remain bearish towards the safe-haven currency.

What’s coming up?

Looking ahead, the pound may sour at the start of 2020 with the publication of the UK’s manufacturing PMI, with December’s final reading set to confirm growth in the UK’s factory sector slumped to a seven-year low.

This will be followed by the construction PMI on Friday, with economists forecasting the construction sector will have suffered its eighth consecutive month of contraction in December.

For EUR investors the focus in the second half of the week will be Germany’s latest CPI figures, with the euro set to rise if domestic inflation accelerated in line with expectations last month.

Finally, the US dollar may remain under pressure as the publication of the ISM manufacturing PMI on Friday is expected to show growth in the US factory sector contracted again in December.
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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