This morning’s UK labour market data from January and February showed the continued recovery the Bank of England likes to see to continue hiking interest rates, while the higher wages slightly reduce expectations that some members will vote for unchanged policy this week.
Payrolled employees from February doubled the forecast and printed at 275k, while January’s 3M unemployment rate fell from 4.1% to 3.9% vs expectations of 4.0% – although this is in part driven by a fall in the participation rate. Wages grew by 4.8%, which is 0.2% higher than the consensus had foreseen and perhaps more than the Bank of England hoped ahead of Thursday’s meeting, where the Bank will have to weigh the elevated inflationary pressures against the uncertainties around the Russia-Ukraine outlook.
Wage growth will be a key factor for the MPC when judging how much wider inflationary pressures will be passed through with second round impacts.
While the data only provided the pound with a small uptick this morning, and shouldn’t move the needle for the BoE later on this week, there may be just enough for the SONIA strip to open close to flat when interest rate markets open, rather than a little higher like its Euribor counterpart.
GBPUSD sees moderate uptick after stronger jobs data but continues to trade within daily ranges
Ima Sammani, FX Market Analyst