Excel Currencies Blog

Hot UK wages continue to underpin the Pound..

Sterling v US Dollar has hit the highest level in 15-months this morning as UK wage growth beats expectations. It puts cable 5-cents above last year's average rate and so very much a buy in our opinion, regardless of what may happen in the months to come. Hedging is about 'de-risking' and buying certainty. If you were buying USD last year (which saw a 10% loss overall), you have now recouped nearly half of the losses sustained if buying $ now. 

Sterling v Euro has also improved nicely by 0.3% in trading so far and also represents a very favourable time to exchange, especially with UK GDP data around the corner. An 11-month high sees the pair on par with last year's average, but remember no-one saw this performance coming from the Pound this year and so it's well above what it should be trading at. 

The jobs data release was an interesting one with traders concentrating on the average earning figure increasing rather than the unemployment rate. With bonuses and wages still very high, it means domestic inflation will remain elevated and so the BoE will continue raising interest rates (good news for the £). The unemployment rate rose to 4% in May from 3.8% expected, which represents employment growth is slowing (a key indicator to no longer raise rates if the figure gets too high).