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 wages disappoint – GBP/USD slips
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 has been steady and edged up to 3.0% in August, which was within expectations. The upward trend is expected to continue, with an estimate of 3.2% for the September report.
Sentiments and levels
Last week’s outstanding NFP raises the likelihood of a December rate hike, which would be the first such move by the Fed since 2007. A rate hike would likely send the dollar surging, and rival currencies will be under pressure as the market speculation heats up that the Fed will press the rate trigger in December. So, the overall sentiment is bearish on GBP/USD towards this release.
Technical levels, from top to bottom: 1.5341, 1.5269, 1.5163, 1.5026, 1.4856 and 1.4752.
5 Scenarios
- Within expectations: 2.9% to 3.5%. In this scenario, GBP/USD could show some slight fluctuation, but it is likely to remain within range, without breaking any levels.
- Above expectations: 3.6% to 4.0%: A stronger reading than predicted could push the pair above one resistance line.
- Well above expectations: Above 4.0%: An unexpectedly sharp rise could push GBP/USD upwards, with a second line of resistance at risk.
- Below expectations: 2.4% to 2.8%: A lower than expected reading could pull the pair downwards, with one support level at risk.
- Well below expectations: Below 2.4%: 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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