On March 6, a survey released by the Bank of England indicated that UK employers' wage growth expectations remained at their lowest level in nearly four years during February. The central bank is closely monitoring further signs of easing wage pressures before deciding on potential interest rate cuts. The monthly Decision Maker Panel survey, published Thursday, showed that employers' expectations for wage growth over the next year, measured as a three-month moving average, held steady at 3.6% in February, the lowest reading since the survey series began in 2022. Businesses also slightly lowered their expectations for their own price increases over the next twelve months, with the measure falling 0.1 percentage points to 3.4% for the three months to February. Firms additionally reported an expectation to increase staff numbers by 0.1% over the coming year. This week, investors scaled back their expectations for Bank of England rate cuts, now anticipating only a 25-basis-point reduction this year, as ongoing conflicts involving the US and Israel against Iran intensified inflation concerns.
Meanwhile, bond options traders are betting that the Federal Reserve will forgo any interest rate cuts this year, as escalating conflict in the Middle East drives up oil prices and threatens the inflation outlook. According to data compiled by the Atlanta Fed, as of Wednesday, traders assigned a 25% probability that the Fed would maintain the benchmark rate at its current range through December. This probability stood at just 17% on the last trading day before the conflict with Iran escalated. Among all potential paths, "no rate cut" has emerged as the most likely scenario. Atlanta Fed data shows other possibilities include a 24% chance of a 25-basis-point cut and a 12% chance of a 50-basis-point reduction. Traders even assigned a 16% probability to a rate hike, up from 8% the previous Friday. These probabilities are derived from options on Secured Overnight Financing Rate (SOFR) futures linked to the Fed's policy rate.
Key data to be watched today include the Eurozone's final Q4 quarter-on-quarter seasonally adjusted GDP, Canada's February leading indicator monthly rate, the US preliminary January wholesale inventories monthly rate, the US February seasonally adjusted non-farm payrolls figure, the US January retail sales monthly rate, and Canada's February Ivey seasonally adjusted PMI.
**USD Index** The US Dollar Index edged higher yesterday with a slight daily gain, currently trading around 99.00. Persistent geopolitical tensions, which attracted some safe-haven flows into the dollar, were the primary factor supporting the index's advance. Additionally, positive US initial jobless claims data released during the session provided further support. However, dovish remarks from Federal Reserve officials limited the currency's upward momentum. Resistance is noted near 99.50 today, with support around 98.50.
**EUR/USD** The Euro declined slightly yesterday, currently trading near 1.1620. The US dollar's strength, fueled by safe-haven demand and robust economic data, was the main factor pressuring the Euro lower. Furthermore, weaker-than-expected retail sales data from the Eurozone during the session added downward pressure. Data showed Eurozone retail sales fell 0.1% month-on-month in January, contrary to expectations of a 0.3% increase. Resistance is seen near 1.1700 today, with support around 1.1550.
**GBP/USD** The British Pound experienced a slight decline yesterday, currently trading around 1.3370. The stronger US dollar, supported by lingering risk aversion and positive US jobless claims data, was the main weight on the Sterling. Nonetheless, expectations for Bank of England rate cuts this year cooled as Middle East conflicts heightened inflation concerns, which helped limit the currency pair's losses. Resistance is anticipated near 1.3450 today, with support around 1.3300.
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