UK: Sterling recovered from yesterday's spike after today’s labor report - BBH

Research Team at BBH notes that the sterling has recovered from yesterday's spike to almost $1.21 after today’s labor report.  

Key Quotes

“Data showed a steeper slowing of wage growth than had been anticipated, even though the claimant count fell (-11.3k in February after a 41.4k decline in January).  The unemployment rate slipped to 4.7% (in three months through January), which is the lowest since 1975.  Average weekly earnings (three months, year-over-year through January) slowed to 2.2% from 2.6%.  The Bloomberg median forecast was for 2.4% increase.  It is the weakest wage growth since last April.”

“Royal assent for Brexit is expected tomorrow, and that will leave triggering Article 50 in Prime Minister May's hands.  What kind of UK will leave?  This was a factor that weighed on sterling yesterday.  Scotland wants another crack at independence, and Northern Ireland voted to remain, and the unification of Ireland has been broached with Sinn Fein seeking a referendum as soon as practical.  Leaving aside the polls conducted by Scottish companies, the others, like YouGov/Times show that outcome of a referendum has not changed much.  Spain has made it clear that it would not allow Scotland to join the EU.  It wants to give its own independent-minded regions no incentives.  Hence, Sturgeon's interest in the EFTA instead.”

“May has signaled that she will not attend the EU summit to celebrate the 60th anniversary of the Treaty of Rome on March 25.  Instead, within a day or two of it (March 27?) she is expected to formally trigger Article 50.  Once that takes place, the UK's initiative is lost and it passes to the EU, including on when to begin the negotiations.  Some press reports suggested formal talks might not begin until June.”

“The shadow MPC at the UK Times seems out of step.  Three favor a hike tomorrow, and another three think the next meeting.  A Reuters poll results don't see a hike until 2019.  Look for a unanimous decision tomorrow from the BOE's MPC to keep rates steady.  The BOJ and SNB also meet tomorrow and are expected to keep policy on steady.”