GBP LIKELY TO REMAIN IN A NARROW TRADING RANGE – MUFG

Economists at MUFG Bank analyze GBP outlook after the Office for National Statistics (ONS) released the UK employment data.

There is something in employment data for both the doves and the hawks on the MPC

The PAYE employment in October jumped 33K. The September data was also revised higher from -11K to 32K. The Average Weekly Earnings data showed stronger-than-expected overall wages which slowed from 7.9% to just 7.7%. The PAYE-related wage data also slowed with the median annual growth rate slowing from 6.0% to 5.9%.

We would argue that there is something in this data for both the doves and the hawks on the MPC. While labour demand is stronger, there remain signs of a trend of softening labour demand in the vacancy data and moderating wage growth. In the context of the sharp disinflation in CPI, the majority of the MPC will likely see enough here to justify the current stance of remaining on hold, especially with around half of the monetary tightening still to hit the real economy.

There is not enough in this jobs report to see big FX or rate moves and GBP is likely to remain in a narrow trading range, albeit to the firmer side, ahead of the US CPI today and the UK CPI data on Wednesday.