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Sterling rebounds on UK employment and wages data

Published: Wednesday 21 March 2018

  • No change but clues expected from US central bank
  • Reserve Bank of New Zealand expected to keep base rate at 1.75%
​​By David Johnson

Spring has sprung and it even feels like spring in sunny London. Weather guru, Carol Kirkwood, says it is going to get worse as we approach Easter, though, so I guess we should make the most of it.  
Pressure is on for Bank of England
The pressure on the Bank of England to raise the UK base rate eased a little yesterday as consumer inflation slipped to 2.7% from the 3.0% the previous month. That is still above the Bank of England’s (BoE) central target of 2.0% flat, but Mark Carney won’t have to write a grovelling apology to the Chancellor of the Exchequer this month. Sterling slipped a little on the news, but fought back above $1.40 and above €1.14 again overnight. That will have had something to do with the expectation of improved average earnings and employment in today’s data. Forecasts were for 2.7% average wage growth, eerily similar to the consumer inflation figure and therefore signalling equilibrium between wage and cost growth. The results offered good news for UK workers, with wage growth increasing by 2.6% - just shy of the estimate – so wages are almost keeping up with inflation and stemming the decline in real wage growth. Employment in the UK is up and unemployment is down. Sterling seems happy with this positive data, and we are also expecting good figures on government borrowing, so that ought to provide a further boost for the Pound.
Middle East tensions increase on oil price rise
The US Dollar is a tad weaker as oil prices rose on the back of a fall in Venezuelan production and increased tension across the Middle East. Traders will now brace themselves ahead of the US Federal Reserve’s interest rate decision and statement due at 18:00 GMT. No immediate change is expected, but analysts, traders and investors will impatiently await any news of the timing of the next interest rate hike and any notion of the commencement of a winding down of Quantitative Easing (QE) bond ownership by the Fed.
New Zealand interest rate announcement tonight could move NZ Dollar
Overnight tonight we get an interest rate decision from the Reserve Bank of New Zealand (RBNZ). Like the US, we expect an ‘on hold’ announcement, but the statement from the RBNZ should express their concern over the strength of the New Zealand Dollar and the overheating in some areas of the NZ economy. However, the housing market gains have moderated to some degree and that takes the pressure off the RBNZ as far as interest rates are concerned.
I’m a poet and I didn’t know it…
And you may not have noticed that today is World Poetry Day. So here is my effort.
Roses are red
Violets are blue
I love to write poems
But often have trouble with rhyme and meter
Ancient Translations

Having been a monk his entire adult life, Brother Andrew was responsible for training new scribes in the art of copying by hand -- word for word -- the holy writs. One day, an eager new scribe, Brother Jonathan, asked if anyone had ever made a mistake.
"Oh no," said Brother Andrew. "These words have always been correctly copied from generation to generation." Sceptical, Brother Jonathan asked Brother Andrew how he knew. "My son," said Brother Andrew as he shuffled off toward the monastery's library, "let me get you the first volume ever written, and you will see that it is just as correct today as it was then."
Many hours passed and Brother Andrew was nowhere to be seen. Finally Brother Jonathan decided he had better check on the elderly monk. At the library, he spotted Brother Andrew sitting alone in a candle-lit corner, tears running down his wrinkled cheeks and his shoulders rising and falling in huge sobs.
"What's the matter?" Brother Jonathan asked.
"I can't believe it, all those wasted years… decades even." Brother Andrew responded, his voice quivering with emotion.
"Is that the original scripture?" Brother Jonathan asked.
"Yes it is,” said Brother Andrew, “and guess what. The word is celebrate. Cel-e-BRATE! With a damned R!!"

Today's Major Economic Releases

Market BST Data/Event Previous Expected
GBP 09:30 UK: Average Earning Index 2.7% 2.8%
GBP 09:30 UK: Unemployment Rate 4.4% 4.3%
USD 12:30 US: Current Account -101b -125b
USD 14:00 US: Existing Home Sales 5.38m 5.41m
USD 18:00 Federal Reserve Official Funds Rate 1.50% 1.75%
USD 18:00 Federal Reserve Bank Statement    
USD 18:00 Federal Reserve Economic Projections    
USD 18:30 Federal Reserve Press Conference    
NZD 20:00 Reserve Bank of New Zealand Official Cash Rate 1.75% 1.75%
NZD 20:00 Reserve Bank of New Zealand Rate Statement    

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