Talking Points
- UK nominal wages rose but real wages fell for the eighth successive month.
- A 0.25% interest rate hike in the US is fully priced in tonight with traders focused on Fed Chair Janet Yellen’s post-decision statement.
UK unemployment remained stagnant at a 40-year+ low rate of 4.3%, while average weekly wages rose in October, narrowing the real wages gap. Average weekly wages 3m/y-o-y rose to 2.5%, as expected, from 2.3% while weekly earnings ex-bonus rose to 2.3% against expectations and a prior month of 2.2%. Headline inflation Tuesday edged higher to 3.1% but is now expected to fall as the base effect of sterling falls out.
Commenting on today’s labour market figures senior ONS statistician Matt Hughes said: “Employment stayed close to its record high and while up on a year ago, declined compared with the previous three months. Unemployment also fell, but there was a rise in the number of people who were neither working nor looking for a job. Meanwhile the number of vacancies continues to grow, reaching a new record high. There has been a slight pick-up in pay growth in cash terms, which means that although earnings are still growing less than inflation, the gap has narrowed.”
GBP/USD slipped marginally lower on the release but all eyes now are on the latest FOMC rate decision at 19:00 GMT and Fed Chair Janet Yellen’s press conference half-an-hour later. A 0.25% interest rate hike is fully priced into the market.
DailyFX chief currency strategist John Kicklighter will be covering the US rate decision live tonight from 18:45GMT here
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Chart: GBPUSD One Minute Timeframe (December 13, 2017)
IG Client Sentiment data show 54.4% of traders are net-long GBP/USD with the ratio of traders long to short at 1.19 to 1. The number of traders net-long is 0.4% higher than yesterday and 47.6% higher from last week, while the number of traders net-short is 2.0% higher than yesterday and 14.0% lower from last week. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBPUSD prices may continue to fall. Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed GBPUSD trading bias
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--- Written by Nick Cawley, Analyst
To contact Nick, email him at nicholas.cawley@ig.com
Follow Nick on Twitter @nickcawley1
