GBP: Slightly dovish jobs data – ING

This morning’s UK jobs report was mildly dovish. Private sector wage growth, a key BoE metric, undershot expectations, falling to 4.4% YoY, ING's FX analyst Francesco Pesole notes.

November BoE cut now looks unlikely

"In level terms, the past three months have been consistently more benign, with the 3M annualised rate now at 2.4%. We expect the annual rate to drop to 3.7% by December – matching the BoE’s own forecast. Given wage growth has consistently overshot in recent years, simply seeing these numbers materialise would help ease concerns about upside inflation risks."

"The slight fly in the ointment is public sector pay, which was hot in the latest month. But this reflects the current expansive fiscal stance, and the upcoming budget should make clear that this won’t be repeated next year. Separately, unemployment nudged higher. While data quality issues persist, the ONS notes improvements. The trend remains consistent with payroll data: a steady cooling in the labour market and ongoing wage moderation."

"A November BoE cut now looks unlikely. But December – after the Autumn Budget – is more in play than markets are pricing. Our forecast remains for the next cut in February, allowing the Bank one more inflation and jobs print. Pricing for a December cut increased from 7bp to 9bp, and 2-year GBP swap rates are down 4bp after this morning’s release. EUR/GBP has rallied above 0.870, although further gains are set to face the drag of more French political noise."