Pound unsettled after warnings over wage growth outlook for 2018

Philip McHugh December 28th 2017 - 2 minute read

With no data on the calendar, markets were focusing once again on the uncertain and gloomy outlook for the UK economy.

The pound starts today on largely unimpressive form as markets await mortgage data due shortly. GBP/EUR is stuck at opening levels at €1.1260, although GBP/USD has climbed 0.4% to US$1.3452. GBP/AUD has slipped below opening levels to AU$1.7230, with GBP/NZD also trending negatively at NZ$1.8950. GBP/CAD is clinging onto opening levels at C$1.6952.

Read on to see why the pound fell versus the euro and US dollar, despite the worries of the Greek people regarding the end of the current bailout programme and poor US data…

What’s been happening?

The pound edged lower against the euro and the US dollar yesterday after a warning from leading UK think tank the Resolution Foundation over the outlook for wage growth in 2018.

The foundation believes that pay growth will continue to lag behind inflation over the coming year, meaning that the best UK households can hope for in the next 12 months is for wages to stagnate in real terms.

This bodes ill for the UK’s dominant services sector, as consumer spending is the engine of the UK economy.

Meanwhile, although much stronger-than-expected Spanish retail figures provided some positivity, the euro struggled to move far from opening levels after survey data showed that the people of Greece were not feeling confident about the impending exit from the nation’s third international bailout.

Polls showed less than a fifth of Greeks believe that, come August when the bailout programme is due to end, the country’s exit will go smoothly.

GBP/USD was able to more-than regain its lost ground after the close of the London trading session yesterday, thanks to poor consumer confidence data released from the states mid-afternoon.

The sentiment index for December surprised with a worse-than-forecast decline, dropping from 128.6 to 122.1.

What’s coming up?

Thanks to the post-Christmas lull, data remains in thin supply, although at least today the UK, Eurozone, and US will all release at least one piece of data.

First up is the European Central Bank’s (ECB) latest Economic Bulletin, which is followed shortly after by the UK’s BBA loans for house purchase figures for November.

The most impactful release of the day will be the US advance goods trade balance for November, which is predicted to see a marginal narrowing of the deficit.

Written by
Philip McHugh

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