Mixed UK Jobs Data, U.S Inflation Data in Focus
GBP
GBP/USD is currently trading at 1.2556 (interbank), while GBP/EUR has slightly decreased and is now at 1.1639 (interbank).
This morning, British wage growth experienced its most significant slowdown in nearly two years. However, pay is likely still increasing too quickly for the Bank of England to ease its tough stance against cutting interest rates.
Amidst other signs of a cooling labour market inflation, earnings excluding bonuses grew by 7.3% in the three months to October compared to a year earlier, down from the 7.8% growth rate in the three months to September. This decline was the sharpest since the three months to November 2021, according to the Office for National Statistics.
Regular private sector earnings growth also fell to 7.3% from 7.9% in the July-September period.
Additionally, Britain's unemployment rate remained steady at 4.2% in the three months to September, while employment increased by 50,000 people.
The Bank of England expresses concern that pay growth, particularly in the private sector, is still too robust to bring inflation down to its 2% target, despite a stagnant broader economy.
Although inflation in Britain has decreased from 11.1% in October last year, the most recent reading of 4.6% is still more than double the Bank of England's 2% target, keeping the central bank alert to price pressures in the economy.
Events Today (GMT):
07:00 - Average Earnings Index (Oct) - 7.20% vs 7.7% forecast
07:00 - Employment Change (Oct) - 50K vs 52k previous
07:00 - Unemployment Rate (Oct) - 4.20% vs 4.2% forecast?????????
EUR
The Euro is showing a moderately positive tone, with EUR/USD currently trading at 1.0790 (interbank), approaching 1.0800.
This positivity is attributed to speculation that the ECB may commence interest rate cuts early next year following a larger-than-expected fall in Eurozone inflation last month.
Shortly, ZEW Economic Sentiment indicators for Germany and the Eurozone will be released, drawing investor interest.
Weaker-than-expected Economic Sentiment numbers could impact buyer appetite for the EUR/USD. While these numbers may not directly influence the ECB, poor figures could fuel recessionary concerns. Notably, a deteriorating macroeconomic environment could force the ECB to reconsider the timing of rate cuts.
Economists anticipate the German ZEW Economic Sentiment Indicator to decrease from 9.8 to 8.8 in December. They also expect the Eurozone ZEW Economic Sentiment indicator to decline from 13.8 to 11.2.
Beyond the numbers, ECB member commentary, particularly from ECB Executive Board member Elizabeth McCaul, requires consideration.
Events Today (GMT):
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10:00 - German ZEW Current Conditions (Dec) - -76 (forecast)
11:00 - German ZEW Economic Sentiment (Dec) - 8.8 (forecast)
12:00 - ZEW Economic Sentiment (Dec) - 11.2 (forecast)
USD
The Dollar Index, measuring the U.S. currency against six others, dropped 0.21% to 103.84.
Before today's inflation (CPI) report, expectations suggest inflation is still cooling but remains well above the Fed's 2% annual target. Core CPI is expected to come in at 4%.
While headline inflation has cooled more rapidly than anticipated, certain components of the CPI report, such as owners' equivalent rent, remain resilient. Owners' equivalent rent, measuring the change in the cost of shelter for homeowners, is at 6.8%, having peaked in April this year at 8.2%. Wage growth has slowed but remains at 4%.
Tomorrow, the Fed is widely expected to maintain rates, with attention focused on comments from Chair Jerome Powell during his news conference and the central bank's economic projections.
Events Today (GMT):
13:30 - Core CPI (Nov) - 4.00% (forecast)
13:30 - CPI (Nov) - 3.10% (forecast)
CAD
The Canadian dollar is trading in a well-defined range and is unlikely to change today as there are no U.S. or Canadian economic reports scheduled.
USD/CAD is currently trading at 1.3570 (interbank).
Today's U.S. inflation report, followed by the Federal Open Market Committee (FOMC) meeting on Wednesday, is expected to cause some volatility.
Canadian dollar gains are hindered by the December decline in oil prices, with West Texas Intermediate hovering just above the $69.20 low seen last week after traders overlooked the latest OPEC production cuts.
The Canadian dollar closed November as the second worst-performing currency, gaining only 2.30%, partly due to slumping oil prices. The Bank of Canada left interest rates unchanged at its December 6 meeting, surprising no one, but the statement's tone raised some eyebrows. The Bank remains concerned about risks to its inflation outlook but acknowledged economic growth stalling and the labour market easing.
No major events today
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