STO Fundemental - UK wage growth data in focus

UK inflation may have posted its most impressive performance in almost three years yesterday, but the 1.8% print still came in short of expectations and left cable struggling as a result. GBP/USD has given up the 1.25 handle, although today at 9.30am GMT we have the latest UK unemployment statistics. Average earnings numbers will accompany these and by all accounts, this is where the price action could cut in – anything that falls short of expectations here is likely to create something of a headache for policymakers and could heap further pressure on Sterling as a result.

It’s a busy day for US economic data in the hours ahead. Janet Yellen has thrown out few surprises in terms of her maintaining the hawkish stance over interest rates in her Senate testimony, so the expectation has to be that the CPI and retail sales prints at 1.30pm GMT will both come in largely as expected. However we have seen some notable moves on pairs like USD/JPY and EUR/USD in recent days, all in favour of the greenback, so any surprise shortfall in today’s prints could pave the way for a series of reversions.

US crude is holding close to one month lows in the wake of yesterday’s release of inventory data from the American Petroleum Institute. The adherence of Opec members to the recent quota cuts is providing a great opportunity for US shale oil producers to exploit, with production via this method now heading towards a reported 5 million bpd. News like this is certainly going to keep downside pressure on prices and the expectation is that another build in crude inventories will be posted this afternoon. Assuming there are no surprises here then prices could well be bid lower in the near term – it’s difficult to see Opec as willing to continue handing market share to the US shale producers on a long-term basis.

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as an Investment Advice.

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