Pound falls as investors divert their attention to UK employment statistics.
The Pound Sterling (GBP) is expected to fall ahead of the release of UK labor market data. For the three months ending November on Tuesday. Investors anticipate a steep decrease in wage growth. And envision labor market conditions cooling further. As the Bank of England (BoE) raises interest rates and the cost of living problem worsens under relentless consumer inflation.
Soft wage growth figures would dampen inflation expectations and raise expectations of the Bank of England reducing interest rates.
Soft wage growth figures would accelerate the return of inflation to 2%. As lower wages will eventually lead to a decrease in household spending power. Stubbornly higher wage growth has been a primary driver of sticky consumer price inflation. And a reduction in this will bring more respite to BoE policymakers.
Market volume in the United States is expected to remain low due to the long weekend.
Because US markets are closed on Monday, the GBPUSD pair is likely to remain in the red. Due to the long weekend, trading volume is expected to remain low. However, sustained expectations on the Federal Reserve (Fed) cutting interest rates at its March monetary policy meeting would put the US Dollar Index (DXY) under pressure.
Daily Market Movers: The pound falls as risk appetite declines.
The pound falls sharply as investors shift their attention to the United Kingdom’s labor market data. For the next three months. finishing November, which will be released on Tuesday.
Labor demand is projected to continue vulnerable. As job listings by UK firms were 32% lower in December compared to the previous year. According to the Recruitment and Employment Confederation (REC), permanent jobs would fall until 2023.
Investors anticipate a modest increase in the unemployment rate to 4.3% from the previous figure of 4.2%.
Market investors will be paying close attention to the Average Earnings data because strong wage growth has been a key factor in keeping consumer price inflation elevated in the United Kingdom economy.
Average earnings excluding bonuses are predicted to fall considerably to 6.6%, compared to 7.3% increase in the quarter to October, while earnings data including bonuses are expected to fall to 6.5%.6.8%, down from 7.2% in the previous period.
A strong decrease in wage growth would alleviate concerns about persistent inflation and increase the likelihood of an early rate cut by the Bank of England.
Bank of America (BofA) expects that the Bank of England (BoE) will consider reducing interest rates.
Bank of America (BofA) expects that the Bank of England (BoE) will consider reducing interest rates following its August monetary policy meeting. This is in contrast to previous projections for February 2025.
On the contrary, BoE policymakers have not openly considered rate reduction because the UK economy has the highest consumer price inflation in contrast to the other Group of Seven economies.
Policymakers at the Bank of England have often stated that interest rates must remain elevated in order for inflation to return to 2% in a sustainable manner.
After becoming fragile in 2023, the British real estate market has recovered. The real estate sector is off to a good start in 2024. Rightmove. The UK’s top real estate platform, showed a 1.3% increase in asking prices from December 3 to January 6, the highest since 2020.
The market is calm in the midst of an extended weekend. In the United States market owing to Martin Luther King Day.
The US Dollar Index (DXY) is trading at 102.40 as investors prepare for the release of the Federal Reserve’s (Fed) Beige Book and monthly Retail Sales data on Wednesday.
Meanwhile, following the release of a softer than expected Producer Price Index (PPI) report for December. Investors’ confidence in a Fed rate cut decision in March has increased.
According to the CME FedWatch program. The probability of a Rate cuts in March have increased to 70%, from 62% last week.
