UK Data – key points from the FXWW Chatroom

Sterling initially rallied to 1.6840/50 and EUR/GBP tanked to 0.7922 on the 1st few headlines on lifting the growth forecast and cutting the unemployment forecast. Upon a deeper read and the comment on lower wage growth forecast it all reversed hard.
Cable now 1.6725 offered and cross 0.7988 paid 0.7995/00 the major resistance area here. No decent supports in Cable till 1.6700 and 1.6640/50.
According to Citi Techs we will now have a key day bearish reversal with a close below 1.6757, after just posting a key day higher yesterday with the close above 1.6796.
November MPC now down to only 5-6bps from 9-10bps going in. Carney sounding very Yellen like in the Q&A as we listen in. 

RBS: UK labour market data – key points

Average Weekly Earnings (AWE) growth falls to -0.2% 3m y/y in June from +0.4% in May – a little below consensus forecasts at -0.1% (RBS: -0.2%, City forecast range: -0.2% to +0.7%).

We expect this nominal ‘deflation’ to be short-lived: a rebound to around +0.5% 3m y/y seems likely in next month’s data.

Much of this extreme wage deflation reflects bonus payments and the cut in the top rate of income tax in April 2013. Nevertheless, the underlying wage inflation picture remains anaemic with the ex-bonuses measure falling to 0.6% 3m y/y from 0.7% – again, a little below consensus forecasts at 0.7% (RBS: 0.6%, City forecast range: 0.6% to 1.0%). We expect a modest pick-up in the ex-bonuses rate to 0.7% 3m y/y in next month’s data.

Employment rose by 167k (0.5%) in the 3 months to June – a strong increase but some way below consensus forecasts at 270k (RBS: 280k, City forecast range: 180k to 300k). Still, this was sufficient to lower unemployment by 132k and take the unemployment rate down to 6.4% (as expected).

The detail of the employment data were reasonably encouraging: the bulk of the rise in employment was full-time employee jobs (155k of the 167k rise) – though self employment growth rates continue to out-strip employee growth rates (0.9% q/q vs 0.5%). Average working time continues to rise: 0.4% q/q.

Overall, the latest labour market data were a little softer than the market expected. Whilst the headline-grabbing negative average earnings print will garner most attention, the pertinent point is that the underlying earnings trends are coming in some way below what the BoE forecast in their May Inflation Report. At the margin, the latest data weigh slightly in favour of the first Bank Rate hike coming ‘later’ (February 2015) rather than ‘sooner’ (November 2014), but these data could easily be eclipsed by the Inflation Report at 10:30. 


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