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Pound Rises As UK Salaries Continue to Grow
  • The day’s best performing currency is the Pound due to positive economic data. However, the main price driver will be tomorrow’s UK inflation rate which analysts expect to rise.
  • The UK Claimant Count Change read 1,100 lower than expectations and the average salary index rose from 5.6% to 5.8%.
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  • USA100 and SNP500 decline as investors prefer to “cash in” profits before this afternoon’s US inflation reading. Stocks continue to decline this morning with the Dow Jones witnessing the weakest decline.
  • Gold rises ahead of today’s inflation reading and may gain momentum if inflation declines as per analyst’s expectations. Buy signals can strengthen above $2,028.18.

GBPJPY – Will the UK’s Inflation Rate Continue to Support the Pound?

The UK saw a rise in its Claimant Count Change, indicating an increase in citizens claiming benefits, which stood at 14,100 instead of the anticipated 15,200. Although this lower figure provided some support for the GBP, economists remain concerned about the ongoing upward trend in unemployment benefits claims, which have not decreased month on month since June 2023.

Furthermore, the exchange rate received a boost from the Average Earnings Index, which increased from 5.6% to 5.8%. This uptick can bolster the economy, stimulate consumer demand, and help maintain higher levels of inflation. Consequently, the economy’s momentum remains robust, potentially prompting regulators to keep interest rates elevated to address inflationary pressures. This underpins the Pound’s upward trajectory. However, this could be undermined if tomorrow’s inflation release falls short of expectations. Analysts anticipate UK inflation to edge up from 4.0% to 4.1%.

Meanwhile, Japan is not slated to unveil any significant news or data affecting the Yen, leaving the currency predominantly swayed by technical factors and Dollar sentiment. Any weakening of the Dollar could lend support to the Yen. From a technical standpoint, the price is exhibiting divergence, indicating potential price weakness and a looming downturn. Although the price is nearing resistance levels, there are no immediate sell signals apparent at present.

XAUUSD – Gold Close to Buy Signal From Technical Analysis.

The price of the Japanese Yen and the Dollar is not showing any signs of major gains over the past week. The poor performance is positive for Gold, which is competing with other safe haven assets. However, even so, the price of Gold has also struggled over the past week but is increasing in value this morning. The price of the XAUUSD is trading 0.28% higher and has risen for 4-hours consecutively without experiencing any retracements.

The commodity’s price will significantly hinge on this afternoon’s US inflation rate and Core inflation figures. Analysts anticipate Core Inflation to decrease from 3.9% to 3.7%, marking its lowest level since 2021. Additionally, there are expectations for a 0.5% drop in overall inflation. Should inflation indeed experience such a notable decline, the price of Gold could see an uptick. This speculation arises from investors potentially factoring in the possibility of another interest rate cut in March. Consequently, investors might choose to allocate their funds towards Gold to manage risk or safeguard against inflation.

However, the latest Gold report does not show any indication of investors believing Gold will rise. Last week, the “bulls” opened 222,000 positions in the asset, and the “bears” opened 7,575,000 positions, increasing their number for the first time in two months. Though the report is from last week, we do not know how investors have reacted since. Today’s price action will fully depend on the inflation rate.

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Michalis Efthymiou
HFM’s Market Analyst
Michalis Efthymiou brings over 9 years of extensive experience in the financial services industry across the United Kingdom and Europe. Initially serving as a financial advisor in London for 5 years, he has transitioned into the field of market analysis over the past 4 years.
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