Foreign Exchange Daily Market Update 16/10/18

Tue, October 16, 2018

Sterling strengthened after wage increase papers overs the growing Brexit uncertainty.

Sterling rose after British wages grew at its fastest pace in almost a decade, compensating concerns over Brexit.

The pound strengthened as data showed that average earnings in the last three months excluding bonuses rose by 3.1% and unemployment was held at a 43-year low, indicating the economy is operating with little slack. GBP had been weighed down due to the deadlock in Brexit talks, ahead of the EU summit on Wednesday that was meant to be a deadline to get a deal done.

Earnings have surprised to the upside, which is even more surprising given the uncertainty over Brexit. The solid numbers are driving the pound onto $1.32 levels.

In spite of the stronger wage numbers, the Bank of England is not expected to increase interest rates before the UK leaves the EU in March. The next rate hike is being priced in for August 2019.

The pound rose 0.4% to $1.3200 against the dollar at 10:00 this morning. It has strengthened 0.3% to €1.1412 against the euro.  

Data to look out today.   

Not much data due out today.

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