In addition to the start of the race for leadership in the Conservative Party, economic data from Great Britain remain equally important. Although yesterday's production publication did not impress, today's labor market data show that it remains strong despite uncertainty regarding brexit.
The unemployment rate in the United Kingdom remained at 3.8 percent, which means its lowest level since 1974. The reading was in line with market expectations. The published data show that unemployment dropped by 34 thousand up to 1.30 million people, and employment increased by 32 thousand to a record level of 32.75 million. The average earnings data also surprised positively, as the reading was above the market consensus.
Earnings of employees in the United Kingdom along with bonuses increased by 3.1 percent in annual terms, up to 532 pounds a week. Although the data mean a slowdown in wages from the revised upward growth of 3.3 percent in the previous period, but they are above the market consensus of 3 percent. Wage growth has weakened in the private sector, services, financial services, manufacturing and retail, hotels and restaurants.
In addition, the British pound may support the statements of the Bank of England MPC member Michael Saunders, who said yesterday that the central bank does not have to wait until all political uncertainty around brexit falls to raise interest rates. Today, in turn, he added that in the UK there may be more interest rate hikes if brexit goes smoothly. Nevertheless, if the Bank of England were to make a decision, it would seem that it could be the earliest in the last quarter of this year. However, the interest rate market does not value such a possibility at all, because it sees the possibility of interest rate cuts by 3 basis points until December – which in practice may mean no change in interest rates by the end of the year in the United Kingdom.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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