British Average Earnings Index, released each month, is a leading indicator of consumer inflation. A reading which is higher than the market forecast is bullish for the pound.
Update: UK employment data OK – GBP/USD attempts recovery
Here are all the details, and 5 possible outcomes for GBP/USD.
Published on Wednesday at 9:30 GMT.
Indicator Background
The Average Earnings Index is closely watched by analysts, and as a key indicator, an unexpected reading can have a significant effect on the movement of GBP/USD.
The indicator slipped to 2.4% in October, which was within expectations. The markets are expecting the downward role to continue in November, with an estimate of 2.1%.
Sentiments and levels
The US dollar continues to enjoy broad strength against the pound, as nervous investors flock to the safe-haven currency. With speculation about another Fed rate hike early in 2016, the US dollar will be even more attractive to investors. So, the overall sentiment is bearish on GBP/USD towards this release.
Technical levels, from top to bottom: 1.4752, 1.4562, 1.4346, 1.4227, 1.4135 and 1.40.
5 Scenarios
- Within expectations: 1.8% to 2.4%. In this scenario, GBP/USD could show some slight fluctuation, but it is likely to remain within range, without breaking any levels.
- Above expectations: 2.5% to 2.9%: A stronger reading than predicted could push the pair above one resistance line.
- Well above expectations: Above 2.9%: An unexpectedly sharp rise could push GBP/USD upwards, with a second line of resistance at risk.
- Below expectations: 1.3% to 1.7%: A lower than expected reading could pull the pair downwards, with one support level at risk.
- Well below expectations: Below 1.3%: In this scenario, the pair could break below a second support level.
For more on the pound, see the GBP/USD forecast.
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