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June 2017

Sterling bounces back on inflation data but wages growth lags

Published: Wednesday 14 June 2017

  • Sterling bounces back on inflation data but wages growth lags
  • US interest rates change awaited
  • NZ GDP growth forecast to slow
By David Johnson

An unexpectedly strong UK Consumer Inflation number gave traders all the ammunition they needed yesterday to take profit on the Pound’s post-election slump and that caused a mini-rally in Sterling. A cent of gain against the Euro and about the same against the USD gave Sterling back some of its composure, but it is still pretty weak. Talk of a soft Brexit, a weakened UK negotiating position and those rough, tough EU negotiators abounds.
This morning’s UK Unemployment data was the next change for the Pound and that was expected to be upbeat. As it turned out, the wages growth data was terrible at 1.7% after yesterday’s 2.9% Inflation figure, but the number of fresh jobs being created was a very healthy number. Sterling is mildly stronger on the news.
That rebound in the GBP-EUR rate also had something to do with unexpectedly poor German economic sentiment, as reported by the well-respected ZEW institute. The index reading of 18.6 means nothing on its own, but it is below the long term average of 23.9 and below the expected reading of 21.7. Whilst the expectations part of the survey was poor, the response to the current conditions was quite upbeat. Today’s EU Employment data and Industrial Production numbers are forecast to be disappointing, so maybe further Euro weakness will ensue…
Today’s major headlines come from the US, though. Retail Sales and Inflation data will be the warm up act for the Federal Reserve’s interest rate decision. We are expecting inflation to have slipped a little and likewise the retail activity. However, the strong belief that the Fed will hike the base rate somewhat is going to keep the USD supported in the short term.
Then, overnight tonight, we get the New Zealand Economic Growth data. A slightly slower rate of Gross Domestic Product (GDP) growth is forecast; something around 1.7% on the year – down from the previous 3.3% and continuing in the pattern of the last four quarters. If this forecast proves to be accurate, the New Zealand Dollar will weaken overnight. You may choose to place automated orders to capture the spike – if it happens.
And finally, theft of food from office fridges is a thing. Anyone who has worked in an office will know that. Someone is always happy to help themselves to your milk when they forgot to buy enough. It is even a factor in police stations, apparently. An image is circulating online taken in Halifax Police Station where the fridge is full of plastic milk cartons with padlocks on them. So, who exactly can you trust?


Thought for the day

If at first you don’t succeed, maybe skydiving just isn’t your thing. 
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