Daily digest market movers: Pound Sterling is down while US Dollar is slightly positive
- The Pound Sterling oscillates in a tight range around 1.2630 as investors seek fresh guidance on when the Bank of England will pivot to rate cuts this year. Financial markets are anticipating this will happen in June after recent data suggested that inflation pressures have cooled down in recent months.
- United Kingdom’s strong wage growth remains a major force behind inflation. However, a survey from the UK’s Recruitment and Employment Confederation showed that starting salaries for permanent staff grew at the slowest rate in over three years in March, while spending on temporary workers fell by the most since July 2020. This adds to signs of a slowdown in Britain's job market,” Reuters reported.
- The official Average Earnings Excluding Bonuses rose by 6.1% year over year in the three months ending February. The pace at which wages are increasing is almost double than what’s required to bring inflation down to the required rate of 2%. Therefore, BoE policymakers need to see a significant decline in wage growth so that they can be convinced that inflation will pivot to 2%.
- Going forward, market sentiment after the United States consumer price inflation data for March will be the main driver for the Pound Sterling’s moves.
- The US inflation data will indicate whether the Fed will begin reducing interest rates from the June meeting. Speculation for Fed rate cuts in June has been reduced significantly as the hiring data remained robust in March. US employers recruited 303K fresh payrolls, significantly better than expectations of 200K and the prior reading of 270K. The Unemployment Rate fell to 3.8% from the consensus and the prior reading of 3.9%.
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