State of the UK Economy

Economic Data from the UK this morning shows that Average Earning Index + Bonus have increased by 1.9% which is better than expected (1.7%) and highest since Feb 2011. This gives indication of personal income growth. Claimant count change also came out at -12.6k. These measures the number of unemployed in the UK and it basically affects consumer spending. Unemployment also dropped to 5.5% from 5.6% in previous month.

The bank of England governor later came out to give a quarterly inflation report on the current state of the economy. The inflation report suggests that the first UK rate hike will be in mid-2016. The Bank Governor also downgraded the growth forecast from 2.9% to 2.4% in 2017. He also expects CPI to fall to 0.0% in Q2 of 2015 and negative inflation rate over the next couple of months. He however noted that the fall in inflation should not be mistaken for deflation. He also expects unemployment to fall to 5.0% in 2 years. Wage growth was also revised from 3.5% in 2015 Q4 to 2.5%.The governor sees lower growth due to strong sterling, weak productivity, and high interest rates.

Looking at GBPUSD, the pair has been on a rally since after the election. The upward trend is expected to continue as long as we trade above the 200MA. Traders who are not long yet will look to buy the dips.