British Avg Wages Up, but all Eyes on FOMC

Andamento del mercato - 16/03/2016

Rising above forecasts, average weekly earnings including bonuses in the UK increased by 2.1% in the month of January, up from the slower growth rate 1.90% in December while weekly earnings excluding bonuses rose 2.20% above December’s 2.00%. The UK unemployment rate remained steady at 5.10% for the third month in a row. Despite the strong wage growth, the British Pound was unimpressed as the currency fell to a one-week low at $1.4084. The Pound Sterling continued to focus on the larger Brexit issues as the currency, which erased the initial losses, continued to decline for the past two days after testing highs at $1.4414. The uptick in average wages is likely to put pressure on British inflation, and the data comes ahead of the Bank of England’s monetary policy meeting later this week. Interest rates are expected to remain unchanged as inflation continues to trend below the BoE’s target rate of 2.00%, with the central bank forecasting weak trends into the end of 2016.

Adding to the downside pressure is the UK 2016 budget due to be released at 12:30 GMT which includes the much anticipated speech from Chancellor George Osborne. The budget is expected to be a tight rope walk as Osborne will have to balance out the current spending plans against a slowing global economy, as well as domestic pressures to keep voters happy ahead of the June Brexit referendum. An opinion poll released on Tuesday showed that the Brexit's 'Out' campaign managed to gain a modest lead of 49% versus 47% who want the UK to remain in the EU.

Following the UK’s 2016 budget release and speech, investors' focus immediately shifts to US economic data which includes consumer inflation, housing starts and building permits data followed by the FOMC statement on monetary policy. Market expectations are pricing in no rate cut at today’s event but Janet Yellen’s press conference is likely to keep investors on the end of their seats.


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