Strong Wage & Inflation Data Provide Support for Sterling amid Recession Concerns


Wage growth and inflation data were both reported stronger than expected last week. The ONS reported “In April to June 2023, the annual growth for regular pay (excluding bonuses) was 7.8%. This is the highest annual growth rate since comparable records began in 2001.”

Statista reported “UK inflation rate was 6.8 percent in July 2023, down from 7.9 percent in the previous month, and the lowest inflation rate since February 2022” 

The markets reacted swiftly and priced in a high likelihood of yet another interest rate hike from the BoE, in order to battle ‘sticky inflation’. Off the back of last week’s data releases Sterling rallied against all of its G10 peers. GBP|EUR easily broke through the 1.17 level, and GBP|USD rose to around 1.2770 at its peak. 

Consensus missed with UK Retail Sales figures, capping any further gains for Sterling at the back end of last week. UK Retail Sales fell by 1.2% vs predicted 0.5% decline. The FT reports that this was most likely caused by an unusually wet summer for the UK, discouraging shoppers from heading to the high streets. 

Looking ahead to the week for the UK, we have UK PMI figures on Wednesday which are expected to come in slightly worse than last months, which will most likely put some pressure on the Pound. 


The Euro struggled to gain much footing last week with EU GDP data coming in as expected, with a 0.3% increase QoQ and 0.6% increase YoY. 

With the lack of data releases last week and a general gloomy outlook around the Eurozone’s economy, investors will be looking closely at PMI figures on Wednesday. Christine Lagarde will also be speaking at the Jackson Hole Symposium on Friday. If PMI figures are weaker than expected and Lagarde’s speech is somewhat dovish, we could see more Euro weakness.


The upcoming Jackson Hole Economic Policy Symposium by the Federal Reserve is expected to grab significant attention during the latter half of the week. We also have US PMI figures due on Wednesday, which will serve as a good indicator on whether the Fed is likely to remain in their stance of ‘higher for longer’ interest rates. 

The first day of the Jackson Hole Symposium starts Thursday. At this meeting, important individuals from all around the world such as economists, financial experts, and policymakers get together to talk about the economy. They discuss how the economy is doing, what problems it might be facing, and what actions the government might need to take to keep things on track. Investors and speculators will be listening closely and there will no doubt be a lot of volatility across the board towards the end of the week.

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