UK labor market figures for August showed only modest weakness, with payrolled jobs down by 8K, a softer decline than seen in the US, where labor conditions deteriorated sharply over the summer. Wage growth remained steady at 4.7–4.8% year-on-year, in line with expectations, according to ING’s FX strategist Chris Turner.
BoE outlook unchanged
ING’s UK economist James Smith noted that the latest employment data is unlikely to alter the Bank of England’s (BoE) policy stance. “Many economists were surprised by how little weight the BoE placed on cooling labor market conditions at its August meeting. Unless we see a sharp spike in job losses, today’s data will not significantly change the outlook,” Smith said.
The focus now shifts to Wednesday’s inflation release, where services inflation is expected to ease but perhaps not as much as consensus predicts. ING maintains a base case for a November rate cut but added that a stronger-than-expected inflation print—particularly if not driven by volatile components—could delay that timeline.
GBP/USD reaction
GBP/USD is edging higher today as markets price in the likelihood that the BoE will sustain its hawkish tone for longer. ING expects sterling to remain supported into Thursday’s policy announcement, provided August CPI does not deliver a major downside surprise.
The bank holds a year-end target of 1.38 for GBP/USD, which, it suggests, could be reached sooner if momentum continues.
