BOE Agents report & UK jobs data ease Brexit impact concerns – MUFG

Derek Halpenny, European Head of GMR at MUFG, suggests that a report from BOE Agents around the UK, released yesterday, indicated that there was no immediate evidence of a downturn in economic activity although many companies expected weaker investment and hiring going forward.

Key Quotes

“The good news on hiring is that at least as of May, the labour market was strong. The 176k increase in employment in the three months to May was much stronger than the 55k increase in April and confirmed a stronger economy going into the Brexit vote.

That’s bound to play into shaping market expectations ahead of the BOE’s MPC meeting on 3rd/4th May. MPC member, Kristin Forbes writing in the Daily Telegraph urged caution stating that the MPC needed more evidence before deciding on action. Of course though, by the time of the meeting the QIR will be available and surely based on the evidence in the QIR, there will be justification for monetary easing. It’s worth remembering that the BOE did its own assessment on the fallout from Brexit that was quite downbeat and it will surely maintain those views on a one or two-year time horizon even if the fallout in the markets has been less severe than expected.

Today’s retail sales data is for June and hence we might see some Brexit impact but in reality it will not be until August when we have data for July that we get a clearer picture of the initial Brexit fallout. We still expect a 25bp cut on 4th August and see limited upside for the pound from here.”