Pay growth in the United Kingdom dropped below inflation for the first time in more than two years, official figures revealed on Wednesday. The Office for National Statistics reported that wage growth, excluding bonuses, advanced 2.1% on an annual basis in the March quarter, the weakest gain since the three-month period to July 2016. Thus, pay growth adjusted for inflation dropped 0.2%, the first decline since the Q3 of 2014. Including bonuses, average hourly earnings increased 2.4% in the Q1 of 2017, after rising 2.3% in the three-month period to February. Nevertheless, the unemployment rate fell to 4.6%, the lowest in more than forty years, suggesting that the British labour market remained strong despite weak wage growth.
Meanwhile, market analysts expected the jobless rate to remain unchanged at 4.5% during the reported month. However, the claimant count change rose a seasonally adjusted 19.4K in April, following an upwardly revised climb of 33.5K in the preceding month. If pay growth remains below inflation growth consumer spending will likely stop supporting economic growth in Britain.
Minor US Data
GBP/USD: U-turn in sight
For the third consecutive day this week the British Pound was able to outperform the US Dollar yesterday, approaching dangerously close to the 1.30 mark. The goal remains unchanged, as the Sterling is required to pierce the consolidation trend's upper border in order to continue posting gains. As a result, risks of the pair shifting polarity persist, which would trigger another spark of bearish momentum and would eventually lead to a drop under 1.29, with the consolidation trend's lower border then in focus. Technical indicators keep giving mixed signals, unable to confirm this outlook.
Daily chart
Hourly chart
Traders remain neutral
Once again market sentiment reached a perfect equilibrium, but the portion of orders to buy the Pound inched slightly higher in the last 24 hours, namely from 53 to 55%.
A less optimistic situation is observed elsewhere. The sentiment at OANDA remains bearish, namely 60% of all open positions are short and the remaining 40% are long. Meanwhile, sentiment at Saxo Bank worsened again, with 58% of traders now being short and the other 42% - long on the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders still indecisive
By the end of the next three months traders believe the Cable is to rise above the 1.30 major level, as 64% of survey participants believe so. While the current price is around 1.29, the average forecast for August 18 is 1.3085. The 1.32-1.34 and 1.34-1.36 ranges are now the most popular price intervals, having 17% of the votes.