Pound May Rise if Wage Inflation Pickup Boosts BOE Rate Hike Bets

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Pound May Rise if Wage Inflation Pickup Bolsters BOE Rate Hike Outlook
More BOE, ECB Commentary in Focus as Traders Ponder Policy Trends
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UK Jobless Claims figures headline the economic data docket in European trading hours. An increase of 1.4k is expected, marking a narrow improvement from the 4.6k rise in the prior month. The headline figure carries relatively limited implications for BOE policy bets however and traders will likely Average Earnings numbers far more interesting.

The pace of wage inflation is expected to rise to 3.2 percent, marking the third consecutive acceleration. A higher-than-expected outcome may hint that building domestic price pressures will be able to overcome external disinflationary forces from soft oil prices and a stronger currency. That could bolster rate hike expectations, sending the British Pound higher. A soft result could be seen as delaying tightening and weigh on the UK unit.

Meanwhile, another busy round central bank commentary will see investors combing through the rhetoric for near-term policy clues. Remarks from BOE Governor Mark Carney along with Deputy Governors Bailey, Shafik and Cunliffe may help shape tightening timeline expectations. Meanwhile, comments from ECB President Mario Draghi as well as policymakers Constancio and Hansson may help inform bets on possible routes for stimulus expansion at next month’s meeting.

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