Today, all eyes in the UK are on the Bank of England’s Decision Maker Panel survey of CFOs. ING’s FX strategist, Chris Turner, highlights the pivotal question for the market – will expected and realized wage growth continue to slow?
GBP/USD Outlook: Potential Risks at 1.3100
Turner suggests that if wage growth slows, the market may adjust its expectations for central bank easing cycles. Currently, there is a disparity in the pricing of easing actions between the Fed and the BoE. Turner believes that the BoE may need to implement more easing measures, potentially leaving GBP/USD vulnerable.
Furthermore, today will feature a speech by Bank of England chief economist, Huw Pill, at the Bruegel Institute in Brussels. Pill, who voted against a rate cut in August, may provide insights into the central bank’s future monetary policy stance. Any indication of confidence in addressing disinflation could impact the pound.
In the near term, the risk for GBP/USD lies at 1.3100, with a potential rally in the low 1.30s in the medium term.
Analysis:
The Bank of England’s Decision Maker Panel survey of CFOs serves as a crucial indicator for investors, providing insights into the state of the UK economy. The potential impact of wage growth on central bank easing cycles and the GBP/USD exchange rate underscores the importance of staying informed on economic developments. Investors should monitor speeches by key central bank officials, such as Huw Pill, for clues on future monetary policy actions.