Pound Sterling is under pressure following the revelation of lower-than-expected UK wage growth in the fourth quarter.

The Pound Sterling (GBP) fell dramatically in the European morning session on Tuesday after the United Kingdom Office for National Statistics (ONS) published a sharp slowdown in Average Earnings data for the three months ending November. Despite precarious economic conditions in both the local and international markets, the labor market remained stable during this period. Weaker-than-anticipated wage growth is expected to persuade investors that the Bank of England (BoE) will lower interest rates sooner.

Despite rising economic headwinds, employment levels remain stable.

The UK As the ONS reported a decrease in the third quarter of 2023, the economy is vulnerable to a technical recession. The Bank of England is likewise less optimistic about growth in the fourth quarter of 2023, owing to increased interest rates and a worsening cost-of-living crisis. Now, a lower inflation outlook, along with concerns about future economic suffering, may allow BoE officials to ease up on their tight interest-rate stance.

The GBPUSD pair has experienced a big fall as the Middle East turmoil has heightened the appeal of safe-haven assets. The US Dollar Index (DXY) has updated its weekly high ahead of US Retail Sales data, which will provide more clues about the period in which the Federal Reserve (Fed) may plan to raise interest rates. the rate-cut cycle.

Daily market movers: Pound Sterling declines on risk-off sentiment.

The Pound Sterling has dropped to a new weekly low near 1.2660 after the Office for National Statistics announced solid employment market figures and lower labor costs in the three months ending November.

The unemployment rate stayed constant at 4.2% over this time period, as market participants had predicted.

Employers in the United Kingdom employed 73K job seekers in November, a figure that is much higher than the 50K jobs gained in the three months to October.

Individuals receiving unemployment benefits increased substantially to 11.7K in December, up from 0.6K in November.

Average earnings excluding bonuses fell 6.6%, as expected by market participants. After rising 7.2% in the three months to October. Earnings data, including bonuses, increased at a rate of 6.5%, compared to the consensus of 6.8% and the previous figure of 7.2%.

Wage growth has been a major driving factor in the UK. Leading to price pressures and healthy consumer expenditure.

A steep decrease in UK wage growth is expected to undercut the arguments of Bank of England officials. Who support maintaining high interest rates for an extended period of time.

The Bank of England may consider early rate cuts if the economy approaches a technical recession after GDP declined in the third quarter of 2023.

Following the release of the UK labor market statistics. Investors will turn their attention to the December inflation data. Which will be revealed on Wednesday. Further easing of UK inflation figures would bolster the case for The Bank of England slashed interest rates early.

Meanwhile, the market remains pessimistic as the Middle East issue worsens. The Iranian-backed Houthis have pledged to respond for US and UK airstrikes in Yemen.

US Dollar Index (DXY) has reached a new weekly high above 103.00.

The US Dollar Index (DXY) has reached a new weekly high above 103.00. As investors remain bullish on the Federal Reserve cutting interest rates soon. Investors are looking for new clues about when the Fed will begin to ease its tight monetary policy.

This week, the focus will be on monthly US Retail Sales data for December and the Fed’s Beige Book. A positive Retail Sales report would allow Fed officials to keep interest rates at their present levels until June.