The UK had a somewhat disappointing night of data releases yet it was expected to be far worse. The AUD made tremendous gains over night, 0.4% on GBP and 1.1% on the USD.
Last night the UK experienced Wages Growth for the first time since April 2014. This data represents the 3-month moving average compared to the same period a year earlier. The base year for series calculation formula is Jan 2010. The reason why this data release is so important is because it’s a leading indicator of consumer inflation – when businesses pay more for labour the higher costs are usually passed on to the consumer. Wages growth has already been flagged by BOE Governor Mark Carney as an influencer of the timing of future interest rate rises. Interest rate moves will generally result in an exchange rate move. Wage growth was released at 0.7% from a previous figure of 0.6%, this is considered a change in the right direction.
Claimant Count Change came in slightly better than expected at -18,600 lost to the UK economy; for expectations of -34,200. Although it’s generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labour-market conditions.
As mentioned earlier, BoE Governor Mark Carney, one of the majorities favouring no change to policy, has put wages at the centre of the debate on interest rates. Carney is basically ruling out Interest rate hikes till August 2015. This is because UK Inflation still sits below the BoE targets of 2%, also Wage growth is still showing weakness which supports long term deflationary pressures, alongside employment figures, which are still showing weakness.