GBP Outlook Hinges on Inflation, Wage Data – Goldman Sachs
The outlook for the pound sterling is likely to be defined by the next wage and inflation figures released in the UK, which are of heightened importance after last Thursday’s Bank of England policy decision, according to strategists at Goldman Sachs.
“The messaging went about as far as it could to signal that the MPC could cut as soon as June if the data cooperate. And Governor Bailey’s special emphasis on the incoming data should keep the market’s focus squarely on the upcoming inflation report,” Goldman Sachs strategists said in a note to clients on Friday.
“Upcoming inflation and wage prints should matter a good deal for GBP price action. If the post-FOMC pro-cyclical repricing extends, it could be slightly supportive for the currency, but the Bank of England’s data-dependent stance means that incoming data could overrule the broader trend,” they added.
Wage growth figures for March are set to be released on Tuesday and will be scrutinized closely by the market as the BoE has identified high levels of wage growth and services price inflation as upside risks to its outlook for inflation, and as factors keeping policymakers from cutting interest rates.
Consensus suggests wage growth moderated to 5.3%, from 5.6%, in the three months to the end of March and that the unemployment rate edged higher to 4.3% from 4.2%.
The next UK inflation report is not due out until Wednesday, May 22 but Goldman forecasts that BoE officials will have seen enough of a deceleration to cut interest rates by June, which is sooner than markets currently anticipate and one reason why the strategists expect that GBPUSD will slip back to around 1.2400, from 1.2527 currently, over the coming three months. Nigeria’s Oil production Grows by 4.14% in April – Report
