- The UK jobs report came out significantly better than expected.
- This adds to the BOE’s reasons to raise rates and will push the pound higher.
- But nothing will move until Brexit is resolved.
The UK published its labor market report around 12 minutes earlier than expected. Are UK authorities keen to show they are up-to-speed also with preparations for a no-deal Brexit?
Setting aside the surprising timing, the data are quite robust. Wages rose by 3.4% in January, better than 3.2% expected. Also, wage growth for December was upgraded to 3.5% from 3.4% initially reported. Excluding bonuses, salaries are up 3.4% YoY, as expected and in line with the previous release.
The unemployment rate also beat expectations with a drop to 3.9% from 4% in December and expectations for 4%. The slide below the round number is politically essential.
The more recent Claimant Count Change remains somewhat disappointing. It showed an increase of 27,000 in February after an upwards revised rise of 15.7K in January. Nevertheless, the rise in unemployment claims is yet to translate to a rise in the unemployment rate. At the moment, the jobless rate continues falling.
All in all, the UK labor market remains resilient despite Brexit uncertainty.
But Brexit uncertainty paralyzes everything.
The Bank of England would like to raise rates but will not make any policy changes until uncertainty moves away. The same goes for the reaction in GBP/USD: cable spikes higher to 1.3283 and then fell back to the range.
Every minuscule rumor around Brexit has more influence than these hard data.
But one day and that day may be as early as this week, the skies will clear around Brexit. If the EU grants an extension to Article 50 or if Parliament approves May’s Brexit deal, Sterling will likely surge. And the upbeat data could send it higher, adding fuel to the fire.More: GBP/USD Forecast: Bercow’s Brexit blow has more than one bright side, bulls are back
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