A recent Bloomberg report using Reed Recruitment Jobs data shows that the UK jobs market remains buoyant with people changing jobs seeing a 10% boost to their wages on average. This is markedly higher than last month’s official UK data that showed average earnings including bonus (3Mnth/Year) rising by 5.9% in February, while average earnings excluding bonus rose by 6.6% over the same time frame.
The Bank of England is set to hike the UK Bank Rate by a further 25 basis points to 4.50% tomorrow. Recent inflation data has shown price pressures remaining stubbornly high and today’s Reed Report, while not an official data point, will have many in Threadneedle Street worried that a robust wage market may keep inflation higher for longer. The post-decision commentary and press conference should see BoE governor Andrew Bailey point towards the jobs market as an area of ongoing concern.
The latest UK GDP data will be released on Friday this week and is expected to show that the UK missed going into a technical recession in the first three months of this year. Preliminary year-on-year Q1 data is expected to show growth of 0.2%, compared to 0.6% in Q4 2022, with year-on-year growth slowing to 0.4% in March from 0.5%.
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EUR/GBP broke below a multi-month level of horizontal support on Tuesday, and with it opened below the 200-day moving average for the first time since August 2022. The range-break move happened despite hawkish commentary from a number of ECB board members who see further rate hikes in the months ahead. This commentary should act as a level of support for the Euro but it seems that this is not the case currently. The pair sit squarely in oversold territory, using the CCI indicator, while volatility in the pair remains low. If EUR/GBP continues to fade lower, support should be seen around 0.8600 and 0.8550.
EUR/GBP Daily Price Chart – May 10, 2023
Chart via TradingView