GBP Strengthens on Conflicting BoE Survey Data, Highlighting Monetary Policy Dilemmas

Action Insight Mid-Day Report 12-5-24

GBP Strengthens on Conflicting BoE Survey Data, Highlighting Monetary Policy Dilemmas

Sterling rallied broadly today, driven by BoE’s Monthly Decision Maker Panel survey, which underscored a complex economic outlook that reinforces the central bank’s cautious approach to policy easing. The survey revealed a mixed picture of inflationary and deflationary pressures. Notably, 54% of businesses anticipate raising prices in response to National Insurance contribution hikes outlined in the new government’s first budget. However, an equal proportion also expects to reduce staffing levels, signaling growing concerns about employment.

Additionally, 38% of firms indicated plans to pay lower wages than previously intended, contributing to a deceleration in expected pay growth to 3.8% from 4.1%. Meanwhile, inflation expectations among businesses ticked higher, with consumer price inflation projected at 2.7% for the year ahead, up from 2.6% in October. For November alone, inflation expectations jumped to 2.8% from 2.5%, suggesting persistent cost pressures despite softening wage growth. These mixed signals present a challenging picture for BoE as it deliberates its next steps.

Overall for the day, though, Euro led gains among major currencies, as markets digest the latest developments in France’s political sphere. Prime Minister Michel Barnier has resigned following a no-confidence vote against his government, with President Emmanuel Macron expected to address the nation later today. Sterling ranks as the second strongest currency of the day, followed by the Swiss Franc, marking a rebound for European currencies after recent underperformance. On the other hand, Yen is underperforming, followed by the Dollar. Commodity-linked currencies, including Aussie, Kiwi and Loonie, are positioning in the middle. ....

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GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2646; (P) 1.2684; (R1) 1.2737; More...

GBP/USD's rebound from 1.2486 resumes by breaking 1.2749 resistance today. Intraday bias is back on the upside for stronger rally to 55 D EMA (now at 1.2853). Strong resistance is expected there to limit upside, and bring resumption of whole fall from 1.3433. On the downside, below 1.2615 minor support will bring retest of 1.2486 low first. However, sustained break of 55 D EMA will argue that the near term trend has reversed, and targets 1.3047 resistance for confirmation.

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EURUSD | USDJPY | GBPUSD | USDCHF | AUDUSD | USDCAD

EURJPY | EURGBP | EURCHF | EURAUD | GBPJPY

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Economic Calendar
GMT Ccy Events Actual Forecast Previous Revised
00:30 AUD Trade Balance (AUD) Oct 5.95B 4.58B 4.61B 4.53B
06:45 CHF Unemployment Rate Nov 2.60% 2.70% 2.60%
07:00 EUR Germany Factory Orders M/M Oct -1.50% -2.00% 4.20%
07:45 EUR France Industrial Output M/M Oct -0.10% 0.30% -0.90% -0.80%
09:30 GBP Construction PMI Nov 55.2 53.6 54.3
10:00 EUR Eurozone Retail Sales M/M Oct -0.50% -0.40% 0.50%
12:30 USD Challenger Job Cuts Y/Y Nov 26.80% 50.90%
13:30 USD Initial Jobless Claims (Nov 29) 224K 215K 213K 215K
13:30 USD Trade Balance (USD) Oct -73.8B -75.7B -84.4B -83.8B
13:30 CAD Trade Balance (CAD) Oct -0.9B -0.6B -1.3B
15:00 CAD Ivey PMI Nov 53.1 52
15:30 USD Natural Gas Storage -38B -2B