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15 Feb 2017

Wage growth begins to slow in the UK

United States Dollar: We had a raft of US data yesterday along with central bankers taking centre stage. Data on Wednesday showed U.S. consumer prices recorded their biggest gain in nearly four years, jumping 0.6 percent in January. Retail sales also outpaced expectations, increasing 0.4 percent last month compared to the analysts' poll of 0.1 percent. The comments by New York Fed President William Dudley, a close ally of Fed Chair Janet Yellen, reinforced the central banks cautious optimism that President Donald Trump and the Republican-controlled Congress would not derail plans for gradual rate hikes in the months and years ahead. Fed Chair Janet Yellen offered no additional insight on the timing of the central banks next rate hike in her second day of economic testimony before Congress on Wednesday but a 25% probability is now being priced in for March. FOMC’s Harker also added during his speech "I see three (interest-rate) hikes as appropriate for 2017, assuming things stay on track". Cable fell below 1.25 following the UK’s inflation number on Tuesday and has failed to break these levels again, we currently sit 1.2484. All eyes will now be on the March FOMC meeting where a rate hike is definitely on the cards. Looking ahead today and all attentions now turn to US Building Permits, Housing Starts and Unemployment Claims all for the month of January. British workers saw their pay grow more slowly than expected at the end of last year, official data showed on Wednesday, ahead of a likely squeeze on their living standards from higher inflation in 2017. At the same time, the employment rate hit a fresh all-time high as the number of people in work rose in the three months to December having fallen in the two previous monthly reports. Britains labor market remained strong in 2016 despite the referendum decision in June to leave the European Union. The unemployment rate in the October-to-December period held at an 11-year low of 4.8 percent, the Office for National Statistics said. But pay growth remains weak and Wednesdays data showed that, when adjusted for inflation, the rise in earnings was the slowest since the three months to February 2015. We expect a range today in the GBP/USD 1.2520 – 1.2380 Euro: It’s been pretty quiet on in the Eurozone for the last couple of days with little in the way of data. The trade balance number that was released yesterday, coming in at 24.5b and above forecast. Greeces talks with its official lenders on concluding a crucial bailout review have made progress, but more steps are needed to wrap it up. EUR/USD edged up 0.15 percent at $1.0614, recovering from a five-week trough of $1.052 touched on Wednesday and GBP/EUR currently moves at 1.1761. We expect a range today in the GBP/EUR rate of 1.1720 – 1.1790 Aussie and Kiwi Dollars: The Australian dollar hovered near a three-month high following a slightly better-than-expected reading in the countrys January employment data. The Australian dollar last traded at $0.7709 after touching $0.7732, its highest since Nov. 10. Employment rose by 13,500 in seasonally adjusted terms, beating expectations for a gain of 10,000. December’s increase, previously reported as a gain of 13,500, was revised higher to a rise of 16,300. The unemployment rate fell to 5.7% from 5.8% in December too and we saw GBP/AUD drop from 1.6258 to 1.6138, this morning has opened up higher and we currently trade at 1.6211. The New Zealand Dollar against its US counterpart moved pretty much in line with AUD/USD showing that both pairs took direction from offshore events. The NZD/USD initially dipped from 0.7195 to 0.7145 as the data sparked speculation that the Federal Reserve may increase interest rates as early as March. We expect a range today in the GBP/AUD rate of 1.6130 – 1.6380 We expect a range today in the GBP/NZD rate of 1.7190 – 1.7390 Data Releases AUD: No data EUR: ECB Monetary Policy Meeting Accounts, Italian Trade Balance GBP: No data NZD: Retail Sales q/q, Core Retail Sales q/q USD: Building Permits, Unemployment Claims, Housing Starts If you want instant updates on movements in the FX market and fast access to the UKForex daily commentary, follow us on Twitter.