The British pound is trading quietly for a second straight day. In Tuesday’s North American trade, GBP/USD is trading at 1.3990, down 0.07% on the day. On the release front, there are no US events on the schedule. In the UK, CBI Industrial Order Expectations continues to lose ground, and slowed to 10 points in February. This was shy of the estimate of 12 points and marked a 4-month low. Wednesday has a host of market-movers, so traders should be prepared for some movement from the pair. The UK releases wage growth and unemployment rolls, and the Federal Reserve will publish the minutes of its January meeting. As well, the US will release Existing Home Sales.
The focus will be on UK employment numbers on Wednesday. Wage growth is expected to remain at 2.5% for a third straight month. Claimant Count Change is expected to slow to 2.3 thousand, and the unemployment rate is expected to remain at 4.3%, where it has been pegged since July. The markets will also be keeping a close eye on BoE Governor Mark Carney, who will testify on inflation before a parliamentary committee. Consumer inflation continues to run at a brisk pace of 3%, well above the BoE target of 2%. This has eroded the purchasing power of the British consumer and also dampened consumer confidence.
It’s been a busy start for Jerome Powell, who has just commenced his stint as chair of the Federal Reserve. Strong US data in recent weeks has raised speculation that the Fed may need to accelerate the pace of interest rate hikes in 2018. The Fed is currently projecting three rate hikes this year, but if inflation continues to move upwards, many analysts are expecting that the Fed could press the rate trigger four, or even five times in 2018. Meanwhile, concern over higher inflation and more rate hikes sent the stock markets into a frenzy earlier in February. Powell sought to reassure the markets that the Fed was monitoring the situation, but it’s doubtful that the Fed can do much to prevent volatility in the markets.
