UK Labor Data Offers Soft Numbers, Supports GBP for Now

UK labor data released in June showed softer-than-expected numbers, according to Brown Brothers Harriman's (BBH) Elias Haddad. The unemployment rate remained stuck at 4.9% for a third consecutive month, contrary to consensus and the Bank of England's (BoE) projection of 4.8%. This stagnation was accompanied by slower private sector regular pay growth, which decelerated to 2.8% year-over-year in June, down from 2.9% in May.

Haddad views the current market pricing of 60 bps of BoE rate hikes over the next twelve months as overly aggressive, given the UK's negative output gap and ongoing labor slack. Nevertheless, he believes the UK's favorable growth-inflation mix continues to support the British Pound (GBP) for now.