POUND STERLING LIKELY TO DERIVE SUPPORT FROM UPBEAT JOBS DATA – MUFG

Pound Sterling (GBP) bid after stronger wages/employment data. Economists at MUFG Bank analyze GBP outlook.

Wage growth resilience but signs of weakness emerging

The wage data were again stronger than expected and will encourage continued caution by the BoE over signalling the potential for rate cuts.

The jobs data also were stronger. The 3mth/3mth change in employment increased 72K, stronger than expected while the ILO unemployment rate fell to 3.8%, the lowest level since January 2023. However, the Average Weekly Earnings data on 3mth and 6mth annualised data is now indicating a more meaningful slowdown in the annual rate coming with both rates now in negative territory.

BoE Governor Andrew Bailey saw signs of ‘an upturn’ in the forward-looking data and coupled with the slow pace of decline in the wage data today will encourage continued caution by the BoE. It won’t alter current market pricing that has the first full rate cut priced for August and that should help provide GBP with further support.