Further momentum in UK’s wage growth makes a May rate hike all the more likely, although the latest employment data is a little more concerning, according to James Smith, Developed Markets Economist at ING.
Key Quotes
“It's fair to say the latest UK jobs report is a bit of a mixed bag, although the main takeaway is that wage growth is showing further signs of life. Excluding bonuses, regular pay rose by 2.5% YoY and is a further sign that the tightness we've seen in the labour market is causing firms to lift pay packets to retain staff and hire new talent. It's worth remembering that the year-on-year comparisons are currently being flattered by the fact that wages stayed virtually unchanged through last winter. But even so, when we look at the three-month over three-month change - a better measure of the current momentum in wage growth - pay packets are rising at around a 3% annualised rate.”
“For the Bank of England, which has said rising wages are a key argument for tighter monetary policy, today's data makes a May rate hike all the more likely - although as always, this still relies on renewed Brexit progress over coming weeks.”
“Having said this, the employment picture is starting to look slightly more concerning. Following an expected surge in jobs growth in the last jobs report, the headline 3M/3M change in employment growth significantly undershot expectations at 88,000, and was coupled by a 45,000 increase in unemployment. When we scratch beneath the surface, the "single-month" figures (which we'd caution are not a National Statistic, so worth taking with a pinch of salt) show that the massive uplift in employment we saw in November was more or less fully reversed in December.”
“All of this once again raises the question of whether the sluggish economic growth of 2017 is finally starting to catch up with the labour market. For now, we'd treat the latest data with some caution, but it is clearly a trend worth watching over the next few months.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD: The hunt for 0.7000 kicks in
AUD/USD finally cleared the key 0.6800 barrier, up for the fourth session in a row on the back of the persistent downward momentum in the Greenback in the wake of the Fed’s rate cut.
EUR/USD maintains its constructive tone and targets 1.1200
EUR/USD managed to add to Wednesday’s gains and climbed to the area of weekly tops around 1.1180 following further weakness in the US Dollar as investors continued to factor in the likelihood of extra rate cuts in the next few months.
Gold maintains the upward pressure near $2,600
Following a pullback in the early American session, Gold regains its traction and trades decisively higher on the day at around $2,580. The 10-year US Treasury bond yield retreats toward 3.7%, supporting XAU/USD in the Fed aftermath.
XRP eyes gains as Ripple gears up for stablecoin launch, Grayscale XRP Trust notes rising NAV
Ripple (XRP) gained 2.3% since the start of the week. The altcoin’s gains are likely powered by key market movers that include Ripple USD (RUSD) stablecoin, Grayscale XRP Trust performance and the demand for the altcoin among institutional investors.
BoE expected to keep interest rate unchanged at 5% as price pressures persist
After a close call in August, the Bank of England’s September interest rate decision is keenly awaited for fresh cues on the bank’s future policy action and the pace of its bond sales.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.