The pound has been supported by the data but has not gone anywhere fast. What’s next? The focus shifts to the BOE.
Here is their view, courtesy of eFXdata:
Citi discusses the latest batch of UK data this week and sees scope for the BoE’s August meeting to be more live if the recent pattern of robust data holds up.
“UK employment gains a healthy 179k in the 3 months to February, roughly in line with expectations (consensus 181k) with the unemployment rate unchanged at 3.9% (versus BoE’s natural rate of unemployment at 4.25%). Average weekly earnings for February comes out in-line at 3.5% while excluding bonus payments, the growth rate edges down to an inline from 3.5% to 3.4% and still on a steady uptrend – driving up parts of inflation where employment plays a key role,” Citi notes.
“Citi analysts see domestic inflationary pressures building in the UK, citing strong wage growth driving up prices where the share of labor cost in production cost is high (account for 20% of UK CPI). The fresh Brexit extension (to October 31) does allow for some breathing space but if data holds up, then the August BoE meeting might be more ‘live’ than the market currently anticipates,”Citi adds.
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