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UK wage outlook keeps GBP on soft form, poor data weakens USD

With everyone more focused on turkey and crackers than the currency market, last week was fairly limited in terms of exchange rate movement.

But 2018 is now upon us and it’s back to business as usual.

The pound is on mixed form today, with GBP/EUR having fallen -0.3% to €1.1221 while GBP/USD has risen 0.3% to US$1.3550.

Although things may have quietened down over the festive period, the pace of economic releases quickly gets back up towards full speed this week.

Weekly roundup: GBP supported by progress in Brexit talks, but pay forecasts for 2018 cause jitters
Some concerns about the UK economy heading into 2018 have weighed on the pound over the past few days, with Sterling also suffering from a comparative lack of data from the UK.

The pound Sterling to euro exchange rate spent the last seven days fluctuating within a range of about half a cent, failing to break above €1.13.

Meanwhile, GBP/USD gained nearly 2 cents after spending last week almost entirely on the rise; a pattern that looks as if it might continue this week after flattening for the long New Year weekend.

The economic data calendar unsurprisingly had little to offer over the past seven days, with the British Bankers’ Association (BBA) loans for house purchase data for November the only release before the weekend.

While the number of loans made for the purchase of property weakened towards the end of the year, this did not perturb investors or weigh heavily on the pound.

Data may have been lacking, but this does not mean the week was devoid of economic developments to push Sterling in one direction or the other.

Markets were concerned on the 27th when the Resolution Foundation, a leading think tank, released its forecasts for wage growth in 2018.

The report predicted that inflation will continue to outstrip pay growth over the coming 12 months, leaving real wages to stagnate at best and continue falling at worst.

However, sentiment quickly recovered on Wednesday after the Confederation of British Industry (CBI) reported that all sectors of the UK economy saw a sharp uptick in output during the three months to December.

Overall, a net balance of +19% of industry respondents reported output growth during the survey period; an increase of +13% on the results of the November survey.

Tomorrow sees the release of the UK construction PMI for December, which is not predicted to see change in the pace of activity from November’s reading.

Thursday is likely to see more noticeable Sterling volatility, given that consumer lending and mortgage approvals figures will be released alongside the vital services PMI.

These December PMI’s will round out market survey data for the final quarter of 2017, so signs the UK economy was recovering towards the end of the year would put markets in a good mood.[/vc_column_text][/vc_column][/vc_row]