16/11/2017 - Sluggish UK Wages Fail to Keep Up With Inflationary Pressures

GBP

Sterling slipped to a four-week low against the euro on Wednesday, as wages still lag behind inflation in Q3 this year. The pound had briefly climbed on the release, which showed that workers’ total earnings, including bonuses, rose by an annual 2.2 percent in the three months to September.

Wednesday’s numbers also showed the number of people in work in Britain fell by the most in more than two years in the three months to September, in the latest sign of weakness in Britain’s Brexit-bound economy. At the same time, the inactivity rate - a measure of people not in work and not seeking a job - rose by the most in nearly eight years, the Office for National Statistics said.

With the UK labour market data out of the way, traders will now be focused on U.S. inflation data due later in the day, to see whether the core rate of price growth can bounce to a level that puts further rate rises in 2018 on the table.

Investors are also keeping a close eye on Brexit developments. Prime Minister Theresa May’s blueprint to leave the European Union emerged unscathed on Tuesday from a first day of debate in parliament on legislation to sever ties with the bloc. The debate is expected to last weeks.

USD

The dollar recovered slightly on Wednesday, after data showed a surprise rise in retail sales last month as well as an uptick in underlying inflation, cementing expectations for an interest rate hike in December.

U.S. consumer prices barely rose in October as the boost to gasoline prices from hurricane-related disruptions to Gulf Coast oil refineries was unwound, but rising rents and healthcare costs pointed to a gradual build-up of underlying inflation.

The Labour Department said on Wednesday its Consumer Price Index edged up 0.1 percent last month after jumping 0.5 percent in September. Economists had originally forecast the CPI to rise to 0.1 percent in October.

Other data on Wednesday showed an unexpected increase in retail sales last month as heavy price discounting by automobile manufacturers lifted purchases of motor vehicles.

Key Announcements

09.30 – GBP: Retail Sales MoM; Forecast at 0.2% against previous of -0.8%

13.30 – USD: Unemployment Claims; Forecast at 236k against a previous of 239k

14.00 – GBP: BOE Gov Carney Speaks