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GBP lower on slowing UK wage growth

Good morning

It was another quiet session in the currency markets yesterday, no major surprise given the US holiday. Overnight we saw a bit of USD buying that took GBPUSD to the 1.2680 area and EURUSD down to 1.0915, while USDJPUY traded up to 146.15.

This morning we had UK employment data, the key takeaway is that wage growth is continuing to slow which was enough to see GBP sold off, GBPUSD hitting before recovering some losses, now 1.2675 as I type. GBPEUR is lower, now sitting on short term support around 1.1605.

We still have some big news to come for GBP this week. BoEs Bailey testifies to the House of Lords today, he’s likely to continue with the theme that rates will remain high for quite some time, but we’ll look for any changes in his stance. Tomorrow morning we have the UK’s latest inflation readings, expected to show further declines, while Friday morning brings UK retail sales.

In the US, I see Trump has confirmed his status as the front runner for the Republican presidential nomination with a dominant win in Iowa. Is it really possible that Trump can make it back to the White House? 330+million people and Trump is the best that they can come up with? I do admit to defending Trump when he first got into power, saying the world needs politicians who actually do something rather than just please the masses in an attempt to stay in office. To an extent he did this, and many of the policies he introduced such as China trade tariffs still remain in place to this day. But he did also come out with many foolish statements, hardly becoming of a President. The world is in an uncomfortable place right now and I’m not sure Trump is the man to settle things down.

Just to prove my point that people want to see more action from a leader is borne out in part as a poll shows that UK’s Rishi Sunak is considered spineless and false. A tough harsh perhaps, but he’s a good example of someone who tries to please everyone and in doing so actually does very little. He’s under pressure to sort out the Rwanda bill ahead of a vote tomorrow, even the deputy chairman of the conservative party has rebelled against Sunak in a bid to toughen up the Rwanda legislation.

Farage is staying silent for now but I’m expecting him to make a return to UK politics. I did see him making a surprise appearance at Trumps Iowa celebration party. Just imagine a world with Trump and Farage at the helm.

I popped out earlier this morning to run one of the ‘kids’ to the station. The car said it was -5° outside and if anything it looks like it will be colder tonight. Still, spare a thought for American football fans who turned out to watch Kansas City Chiefs take on Miami Dolphins with temperatures down at -20° and a wind chill taking it below -30°.

Highlight today could well be Fed’s Waller who is speaking on economic outlook and monetary policy. It will be interesting to see what he has to say about rate cuts and whether he pushes back on the idea of a rate cut in Q1 2024. His comments do have the potential to move USD.

- 10.00 German ZEW

- 11.10 ECBs Nagel speaks

- 13.30 CAD CPI

- 15.00 BoEs Bailey speaks

- 16.00 Feds Waller speaks

- 02.00 China GDP, retail sales, industrial production


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