[MARKET ANALYSIS] GBP pares Monday's outperformance, dovish UK Jobs support MPC's wait-and-see approach, eyes on CPI Wednesday

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[MARKET ANALYSIS] GBP pares Monday's outperformance, dovish UK Jobs support MPC's wait-and-see approach, eyes on CPI Wednesday

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  • GBP is a little lower against the Buck and Euro as technical-driven outperformance on Monday is reversed. EUR/GBP +0.1% @0.8681, GBP/USD -0.3% @1.3400. 
  • Politics: Manchester Mayor Burnham, touted as a potential leadership candidate (52% prediction in being the next PM on Polymarket), said on Monday that changing the Fiscal rules was not an option. This has led to outperformance in UK assets. Gilts reacted to the quote a little last night, and further this morning, while GBP reacted overnight and saw around 20+ pips move against EUR and USD. Another factor helping the dovish move in UK assets was the dovish UK Jobs data.
  • UK Jobs: Payrolls contracted below both expectations and previous; vacancies and redundancies both fell, signalling low hire, low fire. Unemployment rose a touch above previous and expected to 5.0%, while earnings fell in line with expected and now lie within the range of inflation target the MPC identified previously. All in all, the series as a whole points to a labour market that remains soft, with early April estimates pointing to further weakness (ONS said). The data goes in favour of those who would rather wait and see how the economy develops and reacts to the Middle East energy shock. Inflation data is due on Wednesday, PSNB and Retail Sales on Friday.

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