Tuesday morning started off in red for GBP against both EUR and USD, after average earnings and unemployment figures were released. An indication in the wrong direction for both indices, suggest that the UK economy is moving into deeper water. Why’s that? Well, if we first investigate average earnings – noticing a decline since March, with three consecutive months of lower earnings – raising worries for household when it comes to disposable income. While earnings fell, we did see the UK unemployment rate increase, main reason for this is that national insurance now is in force and minimum wages set at a higher rate, leaving companies with higher employment costs. Expectations is that this unfortunately will continue, and the UK labour market will carry on seeing layoffs and people jobless. GBP was quick to fall against its main currency peers, with market expectations that BoE now will be forced to lower borrowing costs, and percentages for their meeting in August and September rise when it comes to interest rate cuts.
Unfortunately, this could set the tone for the upcoming quarter, seeing pressure on economic growth and retail sales, while the steam is running low for the job market – leaving the UK economy with challenges and downward pressure on sterling. Later in the week, Thursday to be exact, we do have UK GDP-figures (economic growth) being released. The forecast month-on-month is expected to see a retraction from 0.2% to -0.1%. If GDP comes in at this level or even lower, we will see a continuation of GBP weakness against EUR and USD.
GBP/EUR 1.1812 GBP/USD 1.3479 GBP/AED 4.9532
GBP/AUD 2.0694 GBP/CHF 1.1065 GBP/CAD 1.8478
GBP/NZD 2.2305 EUR/USD 1.1398 GBP/ZAR 23.8985