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The FxPro Analyst Team

Forex: How will UK Inflation and Labour Market Data Affect GBP ?

This morning at 09:30 BST will see the release of a series of UK inflation data for March including; CPI, core CPI, PPI and core PPI. It will likely cause volatility for GBP and GBP crosses. GBP/USD is currently trading above the psychological level at 1.2400.

The German ZEW economic sentiment and current situation (Apr), and Eurozone industrial production (Feb), at 10:00 BST, will likely affect the strength of the Euro and the trend of the DAX index.

UK CPI has seen an uptrend since the end of 2015, helped by a weakening Sterling rising food and fuel prices. CPI and the core CPI for February both reached above the Bank of England’s 2% target for the first time since January and July 2014 respectively.

UK inflation uptrend is likely to continue; however, the economic prospect seems to be uncertain due to Brexit uncertainty. The Bank of England is likely to keep rates on hold for the near future.

Wednesday April 12, at 09:30 BST, will see the release of UK labour market data (Mar), including average earnings (from Dec to Feb). If the pace of wage growth is slower than the pace of inflations rise then it will likely result in the weakening of household spending and purchasing power, which will lead to the slowdown of economic growth.

To adapt to rising inflation the UK government is increasing the minimum wage from £7.20 to £7.50 this month and has frozen tax on petrol and diesel for the seventh year.

Monday morning, during the early European session, the dollar index hit its highest level of 101.24 since March 15. However, it retraced and is now trading below the resistance level at 101.00. Fed Chair Yellen made a speech yesterday at the University of Michigan. She stated that “the US economy is healthy and growing at a moderate pace with the Fed close to achieving its goals on employment and inflation, neutral monetary policy and that a gradual rate hike would be appropriate”.

FOMC voting member, Neel Kashkari, will make a speech at 18:45 BST this evening.

There are only two weeks ahead until the first round voting of the French presidential election. Polls conducted by BVA-SALES FORCE showed a tightening race: Macron, Le Pen and Fillion are 23%, 23%, and 19% respectively. Macron and Le Pen got a lower share of the vote compared to 25% from a previous poll. Surprisingly, the far-left candidate Jean-Luc Melenchon, has slipped to third position, with 19% of voters, which is equal to Fillion, which poses more uncertainty to the election.

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