Sterling stuck below $1.28 after below-forecast United Kingdom wage growth

Sterling stuck below $1.28 after below-forecast United Kingdom wage growth

The Pound New Zealand Dollar (GBP/NZD) exchange rate tumbled on Tuesday, losing around 0.2% through the European session, however with NZD lacking any fundamentals to sustain the move, the "Kiwi" fell back again overnight.

A break down below the ¥140 level would be catastrophic and open the door to ¥137.50 rather quickly. Since markets opened on Monday, GBP/EUR has tested higher levels but has generally trended near the opening levels.

Even if the inflation data impresses, the Pound's potential for gains is limited as "no deal" Brexit jitters persist.

"It's not just a question of Brexit, it's also a recognition that the United Kingdom economy has not been particularly strong", Aviva Investors head of multi-asset funds Sunil Krishnan told Reuters.

Amid broad concerns that UK-EU Brexit negotiations may end without an agreement on a post-Brexit trade deal, or that a Brexit deal may fail to pass through UK Parliament due to fissures within the government, markets have become concerned about a possible 'no deal' Brexit.

"Today's wage growth figures could undermine this, particularly with the increasing threat of a no-deal Brexit".

More news: Retail inflation slows to 9-month low at 4.17%

Amid a lack of fresh drivers, concerns about how the Brexit process could impact Britain's economic outlook continued to keep pressure on Sterling on Monday.

UK Trade Secretary Liam Fox said the chances of a "no deal" Brexit had risen to about 60-40, and this dominated Pound movement for most of last week.

As a currency that is heavily correlated to trade and commodities, the New Zealand Dollar is perceived as being a riskier buy than other major currencies like the Pound. Following a sell-off in emerging market currencies towards the end of the week, the pound continued weakening against the U.S. dollar, but made gains versus the euro.

Otherwise, the ongoing financial crisis in Turkey may continue to drive demand for United States dollars, as may the trade war between the USA and China, while GBP will be affected domestically by any major Brexit news. As inflation continues to slow, future rate hike expectations are falling.

Tuesday will see the publication of Q2 Gross Domestic Product (GDP) growth projections from Germany and the Eurozone, as well as July Consumer Price Index (CPI) inflation data from Germany and France.

United Kingdom inflation is forecast to have contracted slightly month-on-month, but the yearly figure is expected to have improved from 2.4% to 2.5%.

Related Articles