Sterling stuck at two-week low as investors await UK jobs data
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While most economic data in Britain has been solid in recent months even in the face of messy EU divorce proceedings, the worry for investors is that months of inventory stockpiling by British firms could show up this quarter.
The first signs of this could come in today’s employment data due at 0830 GMT.
“There’s a possibility that the labour market might fall back after all the recent stockpiling. We had quite a strong first quarter, and the feeling in the market is we might see that change in the second quarter,” said Rabobank FX strategist Jane Foley.
“If firms have got a load of inventories, they are going to be producing less and using less labour.”
Sterling was down 0.2 percent against the dollar on Tuesday to a two-week low of $1.2928 in early trade and down 0.25 percent against the euro at 86.89 pence.
The British currency is also being dragged lower by the broader environment, with trade tensions between the United States and China hurting stocks earlier this week.
“Given the overriding environment, interest rates on the floor and even if we have got a slightly firmer wages number, we could see a brief counter-trend move here in sterling and sterling interest rates because of the overall environment,” said Chris Turner, head of FX strategy at ING.
He said that a strong number could push Bank of England rate hikes expectations up a little more but given the overriding environment he said he doubts investors will go too far down the “normalisation” road.
Expectations are for the data to show wages increased by 3.4 percent in the three months to the end of March compared to the same period a year earlier, according to a Reuters poll, a slight decrease from 3.5 percent the month before that.
The Bank of England has said in the past that a rate hike would be contingent on strong wage growth pushing up inflation.
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