British Pound (GBP) Forecast: 50bps Rate Hike Off the Table as UK Unemployment Rises?

[MongiIG]

POUND STERLING TALKING POINTS

• Weakening UK labor market.
• Upcoming Federal Reserve and BoE Rate decisions.
• Key cable support looks vulnerable.

 

GBP/USD FUNDAMENTAL BACKDROP

Earlier this morning, UK jobs data was released with employment change for March beating estimates while the unemployment statistic missed (see calendar below). Wage growth via average earnings also missed forecasts adding support to the less hawkish bias. Initial reaction saw the pound weaken against the greenback after an ease in the labor market could be the start of an economic shift. Later today, U.S. PPI will close off the event list before tomorrow’s key FOMC rate decision.

EUR/GBP ECONOMIC CALENDAR

Source: DailyFX Economic Calendar

While there is much talk around a possible 75bps hike from the Fed, a 50bps jump could dampen dollar strength while the Bank of England (BoE) may be skewed towards the 25bps jump as opposed to the possibility of 50bps prior to today’s unemployment figure. The previous BoE announcement saw three officials vote for a 50bps hike and could remain the same this time around however, a majority vote for half a percentage point is unlikely in my opinion and would really come as a surprise.

BOE IMPLIED RATE PROBABILITIES

Source: Refinitiv

 

 

Jun 14, 2022 | DailyFX
Warren Venketas, Analyst