Cable rebounded lower from a year-high (1.3379) after the British wages growth stagnated at 2.1% year-on-year in July, versus 2.3% expected by analysts.

The weak data revived worries that British households’ earnings growth is clearly not sufficient to compensate for the steeper rise in inflation, but more importantly, the lower purchasing power didn’t translate into a lower inflation so far; the British consumer prices rose by 2.9% year-on-year in August.

The widening price-wage inflation gap is becoming a serious headache for the Bank of England (BoE) policymakers as lower wages require a dovish monetary policy, but only as long as the inflation allows.

Despite the slow improvement in wages and street protests from several sector workers, the rising inflationary pressures could encourage some Monetary Policy Committee (MPC) members to vote in favour of an interest rate hike in the coming months. If the inflation rises above the 3% level, the BoE Governor Mark Carney will have to write an open letter to the Chancellor to explain the significant deviation from the 2.0% mandate target.

Hence, the GBP-bulls should dominate ahead of Thursday’s BoE meeting, despite the knee-jerk weakness due to the soft wages data. Intra-day support is presumed at 1.3215 (50-hour moving average) and 1.3180/1.3160 (area including 100-hour moving average & minor 23.6% retrace on August 24 – September 13 rise).The next important technical level is 1.3420. The pound will have pared half of the post-Brexit losses against the greenback at this level.

The FTSE 100 stocks opened under the pressure of a stronger pound and diverged negatively from their European peers. Mining stocks erased more than 1% at the open.

Euro stagnates near 1.20 against the US dollar

The EURUSD lacks direction near 1.20. The euro-longs creep in as the pair falls below its 200-hour moving average (1.1950 at the time of writing). The 1.20 is no longer a taboo.

Earlier this week, the DAX and the CAC benefited from risk-on inflows and halt in euro’s appreciation. The CAC reached its 100-day moving average (5’222) on Tuesday. The fading short-term positive momentum suggests a minor correction, which could give dip-buyers interesting opportunities to enter the market on temporary low levels. On daily basis, the buy-side gains strength.

EIA cut oil production & demand forecast

The WTI crude trades above $48.00. According to the API data released yesterday, the US oil inventories increased by 6.18 million barrels last week, as the US refineries resumed their activities following disruptions caused by Hurricane Harvey.

More official EIA data is due today. Analysts expect 4.1-million-barrel rise in last week’s inventories versus 4.6 million printed a week earlier. A positive surprise could encourage a further recovery to $49.00/49.50. Resistance is eyed at $49.65/49.80 (September 5 peak / 200-day moving average).

On a side note, the EIA cut its US output forecast for 2017 and 2018. The demand forecast was also readjusted downward, which prevented buyers from entering the market on the back of the announcement.

US stocks at all-time highs, yet Trump’s tax reforms at risk

Investors rushed into the US stocks on Tuesday. The S&P500 renewed record ($2’496), the Dow Jones and Nasdaq stocks advanced on an empowered risk-on sentiment.

Apple shares advanced to $163.96 in New York as the company revealed the much-expected iPhone X, yet closed the day slightly lower on the back of a mixed bag of critics. Although the new iPhone is seen as the future of the smartphone, with its augmented reality feature, its price tag will certainly be a drag on its accessibility to a large pallet of consumers, especially when it comes to the biggest growth potential markets such as emerging Asia.

The US dollar is softer against the G10 majors on talks that President Trump’s tax overhaul could be at risk. The US Treasury Secretary Steven Mnuchin told the CNBC that the government may not achieve the 15% corporate tax rate target ‘given the budget issues’.

The Dow Jones and Nasdaq futures traded flat-to-negative, while the S&P500 futures reversed earlier losses and edged 0.34% in Europe, hinting that the record rally could continue in New York.

Yen, gold pullback as investors pursue risk

Despite the lacking appetite for the US equity futures, the risk-on purchases continued in Tokyo. Nikkei (+0.45%) and Topix (+0.61%) extended gains as the USDJPY cleared the 110.05 resistance. The next natural target for USDJPY longs stands at 110.80/110.90 (100-day moving average / Fibonacci 50% level on July – September decline). Steepening in the US yield curve provides favourable conditions for a consolidation at about the 110.00 mark.

Gold slid to $1’322 (minor 23.6% retrace on July – September rally) and bounced higher. The short-term view is neutral.

Aussie gathers buyers by 200-hma

The AUDUSD rebounded from 0.7994 (minor 23.6% retrace on July – September rise). Buyers remain on top of the game above the 200-hour moving average. The pair could gather a stronger momentum surpassing 0.8045 (major 38.2% retrace on September 8 – 12 correction). AUD-longs could target 0.8061 / 0.8076 / 0.8095, which correspond to Fibonacci 50%, 61.8% and 76.4% retracement respectively.