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11 Jun 2014
UK wages paint a dovish back drop - BBH
FXStreet (Guatemala) - Marc Chandler, Global Head of Currency Strategy at Brown Brothers Harriman noted the signs within todays wage and jobs data from the UK.
Key Quotes:
"While these figures suggest the UK labor market is tightening, the major piece of contrary evidence is that average weekly earnings (reported on a 3-month year-over-year basis) slipped to 0.7% from a revised 1.9% in March (reported with an extra month lag). The lack of upward pressure on earnings suggests that whatever slack has been absorbed in the labor market, it is not yet sufficient to boost wages."
"The absence of wage pressures gives the BOE great latitude in maintaining low interest rates, especially if rising house prices (notably in the south and London) are addressed with tighter credit (as seen by at least one major UK bank) or through macroprudential measures by the Financial Policy Committee, which meets next week. Nevertheless, many expect a more hawkish faction to crystalize in the coming months, leading to a rate hike in Q1 2015."
Key Quotes:
"While these figures suggest the UK labor market is tightening, the major piece of contrary evidence is that average weekly earnings (reported on a 3-month year-over-year basis) slipped to 0.7% from a revised 1.9% in March (reported with an extra month lag). The lack of upward pressure on earnings suggests that whatever slack has been absorbed in the labor market, it is not yet sufficient to boost wages."
"The absence of wage pressures gives the BOE great latitude in maintaining low interest rates, especially if rising house prices (notably in the south and London) are addressed with tighter credit (as seen by at least one major UK bank) or through macroprudential measures by the Financial Policy Committee, which meets next week. Nevertheless, many expect a more hawkish faction to crystalize in the coming months, leading to a rate hike in Q1 2015."