British Pound Edges Higher, Investors Eye UK Wage Growth

Fundamental analysis of Forex market

GBP/USD has lost ground in the Monday session. In North American trade, the pair is trading at 1.2928, up 0.30% on the day. On the release front, British Rightmove HPI improved in February, with a gain of 0.7%. There are no U.K. or U.S. events on Monday, and U.S. banks are closed for a holiday. On Tuesday, the U.K. releases wage growth and unemployment claims.

The pound is under pressure, as the currency posted its third successive weekly loss. The slide would have been even worse, if not for an unexpectedly strong retail sales report on Friday. The January reading rebounded with a strong gain of 1.9%, after a decline of 0.7% in December. However, other key indicators disappointed, raising concerns about the U.K. economy. British CPI slowed to 1.8% in January, falling below the 2.0% level for the first time since January 2017. Inflation has now dropped for three successive months. This was underscored by soft GDP data earlier in the week. GDP for Q4 slowed to 0.2%, and the monthly GDP reading for December has raised alarm bells, with a decline of 0.4%. The British pound is down 1.4% in February, as nervous investors shake their heads over the turmoil surrounding Brexit. Prime Minister May and her European counterparts have all said they don’t want to see Britain crash out of the EU without a deal, but that seems to be the extent of any consensus between London and Brussels.

Is the U.S. economy slowing down? There are concerns about the strength of the economy, after soft consumer data in January. Retail sales and core retail sales showed sharp contraction, and these numbers came on the heels of soft inflation indicators. Inflation remains low, despite a strong labor market. CPI showed no change in January and has failed to post a gain since November. Core CPI has recorded weak gains of 0.2% for four successive months. On an annualized basis, CPI gained 1.6% in January, the weakest year-over-year gain since mid-2017. The soft inflation numbers were a result of low energy prices, which fell 3.1% in January as oil prices remain under pressure.

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