We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Bearish
USD/JPY
Bullish
Gold
Bullish
Oil - US Crude
Bullish
Bitcoin
Mixed
More View more
Real Time News
  • RT @bespokeinvest: Huge breakouts last week across the globe. Pretty much all of the major US and country index ETFs are in solid uptrends…
  • #DidYouKnow traders generally prefer using candlestick charts for day-trading because they offer an enjoyable visual perception of price. Find out how you can utilize it in your trading strategy here: https://t.co/yFn12QgmxO https://t.co/Lc0NfzrjNp
  • Brexit Bill to be bought before Parliament on Friday #gbp #sterling #brexit @DailyFXTeam
  • Join @MBForex 's at 8:30 AM ET/1:30 PM GMT for his weekly #scalping #webinar Register here: https://t.co/VAnAfZU02T https://t.co/PJlUTtq3ed
  • #DidYouKnow crude #oil is a natural resource that differs in composition depending on its location. Find out more crude oil facts from @WVenketas here: https://t.co/Ssp486xz2J #OOTT #CommoditieswithDailyFX https://t.co/zhkg96pyWo
  • RT @IHSMarkitPMI: 🇪🇺 Eurozone endured its worst quarter since 2013, according to flash PMI data, with December coming in at 50.6 (unchanged…
  • Tune in to @CVecchioFX 's #webinar at 7:30 AM ET/12:30 PM GMT to prepare for major event risk in the week ahead. Register here: https://t.co/QscMCDP1ud https://t.co/TZfPbJO4np
  • RT @lisaabramowicz1: Sweden is in the spotlight of global monetary policy as counterparts watch to see how easy it is for the experiment of…
  • RT @elerianm: Good morning. Wishing you all a good week Mixed real economy data to start the week: A beat in #China for retail sales (+8% Y…
  • The inside bar pattern occurs regularly within the financial markets. Incorporating the inside bar strategy within a trading system can enhance a trader’s market analysis technique. Find out how you can use it from @WVenketas here: https://t.co/E3EWOYTYNw https://t.co/zXiuoUw0ar
Put GBP/CAD on Your Radar as GBP/USD, GBP/CHF See Key Reversals

Put GBP/CAD on Your Radar as GBP/USD, GBP/CHF See Key Reversals

2014-07-15 10:10:00
Christopher Vecchio, CFA, Sr. Currency Strategist
Share:

Talking Points:

- GBP-crosses bullish both technically and fundamentally post-CPI.

- Time to put GBPCAD on your radar as USDCAD rallies too.

- Reminder that July forex seasonals in QE era work against USD.

When the Bank of England eliminated the link between the labor market and its interest rate regime in February, it did so under the guise that inflation would be under control over the medium-term horizon. That is to say, even as the emergency 0.50% main rate was to be maintained for an undetermined stretch of time into the future, there was little concern that the previous topside inflation ‘circuit breaker’ of +2.5% annualized would be hit.

Behind the low inflation environment is a low wage growth environment. Without wage growth, in the face of rising prices, consumers are faced with two choices: consume less of their available disposable income; or take on debt to finance consumption. In either case, economic growth potential –in the short-term or over the long-term – is cut down when wages stagnate. For the British economy which depends on consumption for about two-thirds of overall GDP, a consumer that’s losing purchasing power can be damaging.

In the most recent wage data, the 12-month private sector average weekly earnings through March increased by only +1.6% against an expectation of over +4%. Stripping out bonuses, wage growth was only +1.1% annualized. In context of inflation, real wages are dropping: inflation annualized in June was +1.9%, so if nominal wages increased by +1.1% or by +1.6%, real wages declined between -0.3% and -0.8% annualized by the end of June.

The weak wage environment has to be the biggest concern for the Bank of England, as it also reveals the state of the labor market. In the United States, where a significant portion of jobs created in the post-recession era have been part-time and the underemployment rate (U6 – those marginally attached, discouraged and/or part-time workers that want full-time employment) has stayed above 12%, wage growth has been noticeably weak as the supply of workers is plentiful.

Read more: EUR/USD Pinned as EUR/JPY Pivots from June Swing; USD/CAD Emerges

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.