Sentiment towards the Sterling received a sharp blow during trading on Wednesday with the pound depreciating across the currency markets following the mixed reaction towards the recent UK labour report. Although the UK unemployment rate fell to its lowest level since May 2008 at 5.2%, the slowdown in wage growth in the lastthree months has complimented the Bank of England (BoE) Deputy Governor NematShafik’s cautionary comments towards a UK rate hike taking place until wage growth has recovered, and this has subsequently reinforced the growing concerns around the BoE’s clear reluctance to raising UK interest rates.
Investor attraction towards the pound continues to fade and with expectations that the BoE may push back raising rates beyond next year, the Sterling remains vulnerable and open to further losses in the future. On the bright side, personal income is still rising higher than the level of inflation and this should encourage some consumers to continue spending more.
The GBPUSD experienced a sharp decline with prices cutting through the 1.50 support as investors digested the fact that despite the fall in employment rate, the slowdown in wage growth could be viewed negatively by the BoE. This pair remains bearish and the continual concerns over a potential slowdown in economic momentum in the UK economy combined with the firm expectations that the Fed may raise US interest rates today holds the potential to encourage sellers to send the GBPUSD back down towards the recent lows of 1.49. From a technical standpoint, prices are trading below the daily 20 SMA and the MACD has also crossed to the downside. A daily close below 1.50 should attract sellers to attack the currency pair lower.