The Pound rallies as the UK posts its highest wage growth in nearly 10 years. Wage growth in the three months to August rose by 3.1% compared to the same period last year. The 3.1% level does not only signal positivity as a stand alone figure, but also signals positivity when compared to the change in inflation during the same period. The CPI figure during the same period printed at 2.5% which means that there is an attractive 0.6% divergence between the rise in purchasing power and the rise in prices of purchases. In addition to the positive wage growth figures, the UK unemployment rate printed as expected and remained at the 4.0%, which is at its lowest since 1975. For today, investors will focus on the September’s UK CPI figures since a better than expected CPI release will raise chances of the BoE raising rates again given that wage growth is also pointing higher.
After yesterday’s rise, the Pound retraced back towards the 13-period moving average. The cool down in the rally is mainly attributed to investors being uncertain about today’s CPI results. A better than expected CPI release will lead to a downward rejection of the 13-period moving average and cause the currency to continue its rally. However, a worse than expected CPI release will lead to a downward break of the 13-period moving average and pave the way for a drop towards 1.3062.
Support: 1.3124 1.3062
Resistance: 1.3203 1.3255