The Pound sold off yesterday, 2 August despite the Bank of England’s (BoE) widely expected interest rate increase to 0.75 per cent.
Sterling initially strengthened to $1.3124 against the greenback but then fell to $1.2976 as BoE Governor Mark Carney suggested that plans were in place for any Brexit outcome. He also suggested additional hikes will be warranted but they will be “limited and gradual”.
Investors will now shift their attention to the health of the UK economy and GDP data scheduled for release next Friday, 10 August.
Today, my focus will be on the US labour market and particularly wage growth data. Economists forecast 190,000 new workers will have been added. But rising employee wages will put more inflationary pressure and are likely to accelerate the Fed’s plans to raise interest rates later this year.