18 Jun 2015
GBP bid and UK moving towards a rate hike - BBH
FXStreet (Guatemala) - Analysts at Brown Brothers Harriman noted the strong UK weekly earnings data that has sent sterling to four-week highs and brought forward market-based measures of the BOE's first rate hike.
Key Quotes:
"Previously, the SONIA forwards had implied that the UK's lift-off would take place in July-August 2016. With today's news, it has been pushed into June. Average weekly earnings (3-month year-over-year) rose 2.7% while the March series was revised to 2.3% from 1.9%. This is the strongest increase since mid-2011. Although the claimant count fell half of expectations (-6.5k vs Bloomberg consensus for a 13.8k decline), and the ILO unemployment rate was unchanged (5.5%), the higher earnings are consistent with a tighter labor market. Indeed, the UK, US, Germany, and Japan are approaching what economists regard as full employment, and this is seeing the beginnings of some (modest) upside pressure on wages/labor costs."
"The BOE minutes were also released. There were no surprises, but of note two MPC members indicated their decision for steady policy was a close call."
"Today's earnings data would seem to play down the risk of deflation. This seems to increase the likelihood of dissents in future MPC meetings. "
"Sterling has not traded below the previous day's low since June 6. The next target is the year's high set last month near $1.5815, and above there the $1.5880 area, which corresponds to a 50% retracement of sterling's losses since last summer's peak near $1.72."
Key Quotes:
"Previously, the SONIA forwards had implied that the UK's lift-off would take place in July-August 2016. With today's news, it has been pushed into June. Average weekly earnings (3-month year-over-year) rose 2.7% while the March series was revised to 2.3% from 1.9%. This is the strongest increase since mid-2011. Although the claimant count fell half of expectations (-6.5k vs Bloomberg consensus for a 13.8k decline), and the ILO unemployment rate was unchanged (5.5%), the higher earnings are consistent with a tighter labor market. Indeed, the UK, US, Germany, and Japan are approaching what economists regard as full employment, and this is seeing the beginnings of some (modest) upside pressure on wages/labor costs."
"The BOE minutes were also released. There were no surprises, but of note two MPC members indicated their decision for steady policy was a close call."
"Today's earnings data would seem to play down the risk of deflation. This seems to increase the likelihood of dissents in future MPC meetings. "
"Sterling has not traded below the previous day's low since June 6. The next target is the year's high set last month near $1.5815, and above there the $1.5880 area, which corresponds to a 50% retracement of sterling's losses since last summer's peak near $1.72."