GBP/USD: Trading the British Wages Oct 2015

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.                                                                                                            

Here are all the details, and 5 possible outcomes for GBP/USD.

Published on Wednesday at 8:30 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  improved in July, posting a gain of 2.9%, up from 2.4% a month earlier. This  beat the estimate of 2.5%. The upward trend is expected to continue, with an estimate of 3.1%. Will the index repeat and beat the forecast?

Sentiments and levels

Despite the Fed remaining on the sidelines again last week, monetary divergence still favors the US dollar and is weighing on the pound. The UK economy is not doing badly, but investor jitters over a global slowdown and limping Eurozone could spell trouble for the pound. Thus, the overall sentiment is  bearish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.5590, 1.5485, 1.5341, 1.5269, and 1.5163.

5 Scenarios

1. Within expectations: 2.8% to 3.4%. In this scenario, GBP/USD could show some slight fluctuation, but it is likely to remain within range, without breaking any levels.
2. Above expectations: 3.5% to 3.9%: A stronger reading than predicted could push the pair above one resistance line.
3. Well above expectations: Above 3.9%: An unexpectedly sharp rise could push GBP/USD upwards, with a second line of resistance at risk.
4. Below expectations: 2.3% to 2.7%: A lower than expected reading could pull the pair downwards, with one support level at risk.
5. Well below expectations: Below 2.3%:  In this scenario,  the pair could break below a second  support level.

For more on the pound, see the GBP/USD forecast.