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GBP Firmer on Wages Data, But BoE Outlook Unchanged

FOREX
  • GBP is among the best performers in G10 following the wages and employment release from the UK this morning. Wages came in ahead of expectations at 7.9% vs. Exp. 7.3%, with public sector bonuses helping boost the topline figure. On an ex-bonus basis, wages were inline with forecast at 7.7%.
  • GBP/USD initially stuttered on the approach to the 1.23 handle, but trades comfortably north of there headed through the NY crossover. 1.2308/09 marks initial intraday resistance, the 50% retracement for last week's downleg as well as the Nov09 high. Despite the strength in GBP, SONIA and BoE pricing markets have seen little material response, keeping markets of the view that the Bank remain at the peak of the current tightening cycle.
  • The single currency trades well, with EUR firmer against most others. The expectations component of Germany's ZEW survey came in ahead of expectations and at the highest level in nine months, potentially allaying fears of a protracted phase of economic weakness across the winter months.
  • EUR/SEK sits firmer, higher for the first session in eleven after the CPI release this morning came in softer-than-expected. Core CPI slowed to 6.1% vs. Exp. 6.3%, providing a headwind to SEK and prompting a minor reversal of recent strength. The cross has recovered 0.35% off the session low, but remains in negative territory on the week.
  • The US inflation release takes focus going forward, with markets expecting CPI to have risen 0.3% on the core ex-food and energy metric, and just 0.1% for the headline, leaving the headline Y/Y to have slowed to 3.3% from 3.7%.
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