18 Feb 2015
Strong labour data good for GBP, bad warns of weak productivity – BBH
FXStreet (Barcelona) - The Brown Brothers Harriman team reviews today’s UK labour data release, noting that the sterling positive numbers might lead GBP/USD towards 1.5500-1.5600 levels, and further adds that the increase in aggregate work hours warns that productivity remains weak.
Key Quotes
“Strong employment and earnings data in the UK lifted sterling to the upper end of its recent range near $1.5450. A break would quickly target the $1.5500-$1.5600 area.”
“The claimant count fell by 38.6k, which is about 50% more than the consensus expected, and the December decline was revised to 35.8k from 29.7k.”
“The unemployment rate fell to a new cyclical low of 5.7% (ILO measure).”
“Earnings growth, reported with an extra month lag, rose 2.1% at a year-over-year pace in Q4 14. The consensus was for a 1.7% increase.”
“The jump in earnings comes as the BOE minutes highlighted the expected upward pressure on earnings (toward 4%) and the rise of a jump in inflation when the oil increase drops out.”
“There are two cautionary elements. First, the increase in aggregate hours worked warns that productivity remains weak. This speaks to the growth capacity of the UK economy.”
“Second, the labor market may be tightening, but the earnings growth was flattered by bonuses. Excluding bonus, earnings growth actually slipped to 1.7% from 1.8%.”
“That said, there is probably more room for interest rate expectations to adjust, and that means upward pressure on UK rates, especially at the short end.”
“Gilt yields are also backing up, and at 1.81% today, the 10-year yield at its highest level this year. This represents about a 50 bp increase since the Jan 30 low.”
Key Quotes
“Strong employment and earnings data in the UK lifted sterling to the upper end of its recent range near $1.5450. A break would quickly target the $1.5500-$1.5600 area.”
“The claimant count fell by 38.6k, which is about 50% more than the consensus expected, and the December decline was revised to 35.8k from 29.7k.”
“The unemployment rate fell to a new cyclical low of 5.7% (ILO measure).”
“Earnings growth, reported with an extra month lag, rose 2.1% at a year-over-year pace in Q4 14. The consensus was for a 1.7% increase.”
“The jump in earnings comes as the BOE minutes highlighted the expected upward pressure on earnings (toward 4%) and the rise of a jump in inflation when the oil increase drops out.”
“There are two cautionary elements. First, the increase in aggregate hours worked warns that productivity remains weak. This speaks to the growth capacity of the UK economy.”
“Second, the labor market may be tightening, but the earnings growth was flattered by bonuses. Excluding bonus, earnings growth actually slipped to 1.7% from 1.8%.”
“That said, there is probably more room for interest rate expectations to adjust, and that means upward pressure on UK rates, especially at the short end.”
“Gilt yields are also backing up, and at 1.81% today, the 10-year yield at its highest level this year. This represents about a 50 bp increase since the Jan 30 low.”