Sterling held near a two-week low on Tuesday as British employment data showed lower wage growth in the quarter ending March. This may be a sign of a start of a turbulent period for the broader economy.
Wages in Britain had grown at strong rates over the past year or so but slowed to 3.2% in the first quarter of 2019. Data was lower than predictions of 3.4% and down from the previous reading of 3%. The data also showed employment growth slowed to 99,000, well below a median forecast of 135,000.
Sterling slipped on Tuesday to a two-week low of $1.2928 in early trade before settling at around $1.2948. It was also slightly down against the euro at 86.66 pence.
The Bank of England has said in the past that a rate hike would be contingent on strong wage growth pushing up inflation. Money markets expect one rate hike in the first half of 2020. Any further hits to wage growth and employment numbers could also be a sign that British businesses are hurting from uncertainty over Brexit.
The British currency is also being dragged lower by the broader environment, with US-Sino trade tensions hurting stocks.
START TRADINGForex – Lower Wage growth keeps Sterling close to 2-week low
Investors are losing faith that a U.S.-China trade deal could happen soon. Traders are bracing their portfolios for a more prolonged battle that could hamper global growth. Market volatility has jumped. Investors are also focused on whether Trump will impose tariffs on imported cars and auto parts as talks continue with the EU and Japan.
Analysts are trying to gauge what the net effect of permanent U.S. tariffs on Chinese imports would be on the dollar. The dollar was buoyed as U.S. and Chinese officials said the two countries would continue to negotiate on trade.
The only obvious impact on currencies is elevated risk aversion which tends to benefit conventional safe havens.
The Australian dollar regained some poise on Tuesday after U.S. President Donald Trump suggested trade talks with Beijing could yet make headway. The Australian dollar firmed 0.1% to $0.6952 after brushing its lowest since early January earlier in the session.
The euro slid against the dollar on Tuesday after Italy’s deputy prime minister said the country is ready to break EU budget rules if necessary, to spur employment.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money