Sterling traded in a very narrow range overnight and jumped to 1.2720 on alarming UK jobs data, but it has now retraced the movement and is hovering at the 1.27 level. USD/JPY trades mid 145-146 and EUR/USD edges comfortably above 1.09. AUD/USD trades above 0.65 and NZD/USD moves towards 0.60. The Bloomberg Dollar Spot Index heads lower, poised to trim its 3-day winning streak.
UK wages grew at a record pace suggesting the tight labour market could be feeding inflationary pressures through the economy. Average earning excluding bonuses increased by 7.8%in the three months through June YoY, from the previous print of 7.5% (which also came in above expectations). The Bank of England has expressed its concerns regarding soaring wages pushing prices higher in the UK, and this print of data just confirms that they are right to be worried. In addition, this adds further pressure on the BOE to raise interest rates once again, and policy makers have stated in the past that shall these pressures remain, that an interest rate increase could be in sight.
PBOC unexpectedly cut rates in efforts to stimulate the weakening economy of China, that is facing risks from a worsening property slump and poor consumer spending. USD/CNY advanced 0.4% to 7.2875, November’s high, and USD/CNH as much as 0.5% to 7.3124. China’s July industrial output and July retail sales both missed estimates YoY, adding further evidence of the deteriorating China growth momentum and the urgency for these stimulus.