EUR/GBP to stay below 0.830 in the near term – ING
UK labour statistics published this morning are generally quite hawkish for Bank of England expectations, and are leading to a stronger Pound Sterling (GBP), ING’s FX analyst Francesco Pesole notes.
Hot wage data to keep EUR/GBP pressured
“Headline 3M/3M employment slowed only modestly to 173k in October, against expectations for only 5k. That is, however, an unrealiable measure and may be ignored. The same is true for the unemployment rate, which remained at 4.3%.”
What is really important for the Bank of England is the surprise acceleration in wages. Both headline weekly earnings and the ex-bonus measure accelerated again above 5.0%. Crucially, this acceleration is all concentrated in the private sector (where wages grew 12% on a month-on-month annualised basis), where pay trends are more intrinsically linked to wider economic trends.”
“There are still indications that the jobs market market is cooling – e.g., lower vacancies than pre-Covid – but clearly today’s data is offering a reason for hawks to get louder in the MPC. Ultimately, there is a compelling case for EUR/GBP to stay below 0.830 in the near term, with risks still skewed to the downside as the BoE will highly likely stay on hold this week, highlighting the striking policy divergence with a dovish ECB.”