The latest UK Earnings forecast have led to serious concerns amongst economists as average wage growth could fall to levels last seen in 2008. There is forecasted to be falls in wage growth whilst increases in inflation which will eventually cause a pinch on the whole UK population. Whilst many of the economic forecasts for the UK have been hugely wide of the reality since Brexit, with many expecting recessions to set in. This will be of concern as investment in the UK is likely to fall until there is further certainty.
There is an argument through all this that says if the UK can negotiate a trade deal with the EU these forecasts will be nowhere near as negative as expected, however once again that would be speculating on an outcome. However, I would argue at the moment that it’s hard to predict what’s happening in a month’s time, never mind five years.
Quiet end to the week and a quiet week ahead
Tomorrow, and over the course of the next week there will be very few data releases which means from Sterling perspectives politics will be king. The focus is likely to be the Brexit talks with progression onto trade talks expected to be only just around the corner. Normally over the weekend there is some release from the UK Government on Brexit and it might not be long before Theresa May ups the financial offering from the UK to the EU to advance talks. Mrs May previously offered £20bn and its now thought that could double up to £40bn in order to get talks started again, this could put Sterling on the front foot.
The other major story next week will be the German political landscape. Angela Merkel’s talks broke down to form a new coalition Government which means there could be another election in Germany once again going to the polls. This could create major uncertainty and help the GBP/EUR exchange rate rise a few cent.