GBP to take cues from UK labour market data – Rabobank

According to analysts at Rabobank, the release of the UK labour data this morning will keep sterling focussed on the likely path of UK monetary policy.

Key Quotes

“The report will confirm that UK employment levels are at historical highs but the market is set to pay more heed to the earnings numbers.  Like in many other G10 economies, tight labour market conditions in the UK have failed to bring signs of a significant upward push on wages.”

“Yesterday comments from new BoE MPC member Ramsden put him clearly in the dovish camp.  He stated that despite the robust growth in employment there is “no sign of second round effects onto wages from higher recent inflation”.  He also implied that political uncertainty was a factor behind his caution adding that “leaving the EU is a multi-dimensional process rather than a single event, and the coming months are going to be crucial ones of the Brexit negotiations”.”

“Yesterday the key Brexit negotiators David Davis and Michel Barnier bickered about whose fault it was that the talks have reached an impasse. Davis argued that the EU was “using time pressures to see if they can get more money out of us”.  Barnier retorted that the EU was “ready and even willing to speed up the negotiations”.  Meanwhile the impression that PM May is still unable to convince ministers to toe the party line on Brexit was reaffirmed as Home Secretary Rudd appeared to contradict May’s ‘no deal is better than a bad deal’ view, by commenting that a no deal Brexit was “unthinkable”.  Rudd’s view was supported by the OECD which yesterday warned that ‘no deal’ would see investment seize up, the pound fall and the UK’s credit rating cut. Perhaps unsurprising given this view was the forecast from the OECD that reversing the Brexit process would have a positive impact on the UK economy.”