Positive wage growth likely to supportive of sterling but unlikely to be major influencer

Pound has declined a lot in the aftermath of the UK referendum and focus now is on the path of the negotiation, so today’s report will only improve sentiment if wage growth comes positive but not likely to change any course as the reporting date is May, whch is pre-referendum. Post-referendum data will be major movers in the sterling now a days.

Today’s employment report to be released at 8:30 GMT may provide something to chew for the bulls and that is wage growth.

Below is the preview of the report -

• As of now unemployment rate in the UK stands at 5 percent and median estimate suggests it is likely to remain same.
   
• So the major focus will be on earnings growth since that will be the key influencing factor of inflation and as a measure of wellbeing.
   
• Moreover, a positive wage growth should help to downsize the fear of a slowdown in the economy. It will be a nice evidence that companies are ready to increase wages even in the face of a potential exit from the union.
   
• Wage growth has been declining since October last year when it reached the peak of 2.8 percent growth excluding bonus. Wage growth was 2.3 percent excluding bonus and 2 percent including it.
   
• Today earnings growth is expected to be 2.3 percent both including bonus and excluding it.

It may turn out to be a non-event but if it doesn’t reaction will be vital to watch. The pound is currently trading at 1.31 against the dollar.