British Pound: Softer as jobs data cools hikes – ING

ING’s Chris Turner reports a firmer EUR/GBP after UK labour data, with economist James Smith highlighting a cool jobs market and minimal wage pressures, implying little impetus for Bank of England hikes this year. Sterling money markets still price 60bp of BoE tightening into next year, which Turner expects to be gradually priced out, with EUR/GBP biased toward 0.8570/0.8580.

Jobs data temper BoE expectations

“EUR/GBP has opened up a little firmer on the release of the latest jobs data.”

“Nothing particularly earth-shattering in the latest UK jobs figures. Payrolled employment is down a touch – though this masks big differences between government (which is still actively hiring), consumer services (where job numbers are consistently falling and the pace of decline is getting worse) and the remaining private sector, which is flatlining.”

“The unemployment rate is up a touch, though the ONS has already revealed there are temporary sampling issues with the labour force survey underpinning it (on top of the well-publicised existing problems), so I’d take that data with a pinch of salt.”

“Still, the basic story is the same – the jobs market remains cool, and wage pressures are fairly minimal. It suggests little impetus for the Bank of England to hike rates this year.”

“The sterling money market curve still prices 60bp of Bank of England hikes into next year. That should slowly be priced out over the next three to six months, although energy prices will have a big say on timing. Next on the UK agenda this week will be tomorrow’s July CPI, where a lower year-on-year services number would again slightly favour the position of the BoE doves.”

“EUR/GBP looks biased to the 0.8570/80 area.”

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