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Sterling in a roller-coaster ride – KBC

FXStreet (Barcelona) - The KBC Research Team comment that the intraday volatility in EUR/GBP and cable was because of the UK labour market and the BoE inflation report bringing about a divergent message for sterling trading.

Key Quotes

“The UK labour market report was close to expectations as jobless claims declined by 20.400. The unemployment rate was unchanged at 6.0% while a decline to 5.9% was expected. However, sterling reacted to higher than expected weekly earnings. The ex‐bonus measure rose from 0.9% Y/Y to 1.3% Y/Y. Only a rise to 1.1% was expected.”

“Subdued wage growth was a missing link in the UK labour market improvement and was also an important reason for the BoE to stay cautious in preparing markets for a 2015 rate hike. Sterling jumped higher upon the publication of the earnings data. EUR/GBP nosedived to the low 0.78 support area.”

“The BoE governor also acknowledged encouraging signs with respect to pay and the start of real wage growth. However, in a first reaction, the soft inflation forecasts set the tone for sterling trading. EUR/GBP reversed the earlier losses and jumped to the 0.7880 area.”

“Cable returned to the intraday highs in the 1.5940 area after the labour report. The pair however lost more than one big figure after the publication of the inflation report. Currently the pair still struggles to move higher.”

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