GBP Ahead Of UK Jobs Report; Focus On Wage Growth
FX Daily | Oct 18, 2017 09:20
Ahead of the UK employment report, the obvious focus is on wage growth.
The tightening labour market is already been established with the unemployment rate at a very healthy and comparable 4.3%, and expected to remain so. Even a slight tick up here would not be cause for any material concern from this perspective, with migration also working towards further tightening - for now at least - as Brexit uncertainty prompts anecdotal flow back to the continent. For monetary policy, anything close to expectations will see little change to the expectations on a 25bp move next month, but cause some to rethink their perceptions on whether we are entering a tightening cycle - we already believe that we are certainly not - it's one and done for us.
GBP has been trading a tight range this morning - Cable inside 1.3150-1.3200, but whether we get a data led spike higher, barring any significant deviations from consensus, we expect attention to turn swiftly back to Brexit. EUR/GBP is back above 0.8900 after yesterday's BoE rhetoric, with MPC member revealing that he is not ready to vote for a hike, and gov Carney admitting there is a trade off between containing inflation and keeping growth supported. This is the underlying crux of GBP sentiment at the moment, amid the EU negotiations which are clearly not progressing as far as the EU would have hoped - and the ball is in their hands.
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