Talking Points
- UK unemployment is at multi-decade lows but wages are going nowhere.
- GBP likely to weaken if wages don’t keep pace.
The latest batch of UK jobs and wages data will point to the underlying health of the UK economy as inflation moves higher and Brexit negotiations move closer.
The unemployment rate of 4.6 is a 40-year+ low and nearing the BoE’s NAIRU rate of 4.5%, when additional inflation is forecast to kick-in. Bank of England Governor Mark Carney will have to tread carefully at Thursday’s MPC meeting to balance an economy where growth has slipped to just 0.2% in the first quarter, while inflation nears three percent.
For live coverage of Thursday’s Bank of England MPC meeting, trade ideas and commentary, join Senior Currency Strategist @CvecchioFX here
A look at UK assets shows signs of weakness appearing. Will GBP/USD keep its recent ‘softer-Brexit’ gains or will the weakness of the underlying UK economy hold sway. The FTSE 100 remains near record highs, due to GBP weakness, but the more domestically-focused FTSE 250 looks tired after its recent rally to record highs.
Chart: GBPUSD One-Day Timeframe (December 5, 2016 – June 14, 2017)
--- Written by Nick Cawley, Analyst
To contact Nick, email him at nicholas.cawley@ig.com
Don't trade FX but want to learn more? Read the DailyFX Trading Guides
