GBP: Dovish tilt to today's UK labour market data - ING

Sterling is fractionally softer on this morning's UK labour market data for April and May, ING's commodity experts Ewa Manthey and Warren Patterson note.

BoE is well behind the ECB in its easing cycle

"On the face of it, it is a fairly dovish UK jobs report this morning. Wages are down more than expected - private sector at 5.1% YoY. These were due to come lower anyway as a result of base effects, but this is a bigger drop. More eye-catching is the sharp fall in payrolled employees at -109k. That would be the biggest monthly drop outside of the Covid-19 pandemic since the data series began in 2014."

"But this data always gets revised, and more often than not, it is revised up. For example, in March, the initial reading was -78k, and it has since been revised to -35k. Still, there is clearly a more negative flavour to these numbers over the past few months, and it reinforces the need to keep cutting rates, else the Bank of England risks slipping behind the curve."

"This softer data comes at a time when sterling's relatively high yield is in demand. It has, however, triggered a 20 pip rally in EUR/GBP to 0.8435 and could prove a reminder that the BoE is well behind the ECB in its easing cycle, and the policy spread may narrow some 100-125bp against sterling over the next 12-18 months. 0.8445/60 looks like important short-term resistance for EUR/GBP."