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Asset Watch
Tuesday, 18 February 2025
The UK wage growth remained strong in December, with average earnings excluding bonuses rising from 5.6% to 5.9%, the highest in nearly a year. Wages including bonuses slightly exceeded forecasts, coming in at 6% versus the expected 5.9%. Meanwhile, unemployment held steady at 4.4%, defying expectations of a rise to 4.5%. A strong labour market and rising wages could keep inflation elevated, particularly core inflation, which may influence the Bank of England’s (BoE) monetary policy and slow the pace of interest rate cuts.
Markets await the release of the UK Consumer Price Index for January tomorrow at 11:00 AM ,UAE time. The YoY headline is expected to rise from 2.5% in December to 2.7% in January, while the YoY core inflation is projected to increase from 3.2% to 3.5%. The recent 3.5% rise in global oil prices in January has been a key driver of inflationary pressure.
Investors will closely follow today’s speech by Bank of England Governor Andrew Bailey for insights into the central bank’s monetary policy. Key questions include whether the BoE will tolerate a temporary rise in inflation above its 2% target to prioritise economic growth, like the European Central Bank. It should be noted that the ECB recently suggested that its neutral rate could range between 1.75% and 2.25%, providing flexibility for policymakers.
On February 7, GBP/JPY fell to multi-month lows before rebounding due to taking profits operations. Last week, the pair broke above the downtrend line originating from the January 7 high and has remained above it, suggesting a potential upward correction.
Currently, the pair is trading within a zone spanning between188.92–194.60. A daily close above the high end of this zone suggests a possible rally toward 196.89. In this case, the resistance level located at 195.85 should be considered.
A daily close below 188.92 suggests a possible continuation of the downtrend, opening the door for a decline toward 186.76. In this scenario, the support level at 187.80 should be closely watched.
Chart Source: ADSS Platform
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