Research Team at BBH, notes that the UK reported slightly better than expected employment data.
Key Quotes
“The claimant count fell by 18k, which was twice the consensus expectation and the January decline was nearly double the 14.8k initially reported (revised to -28.4k). Average weekly earnings, which are reported with an additional month lag, rose 2.1% in January after 1.9% pace in December. Excluding bonus payment, average weekly earnings rose 2.2% after 2.0% in December. The ILO measure of unemployment was unchanged at 5.1%. Initial sterling gains on the back of the employment data were quickly reversed.
The budget, which will be presented early in the North American session, may be more important for sterling. The labor data is a favorable backdrop for Osborne’s budget. He has warned of additional cuts in public spending. Osborne has recently antagonized many of the Tory members of parliament. Most recently, his efforts last week to liberalize Sunday business laws was defeated with the help of 27 Tory MPs. Earlier, his efforts at pension reform that required closing tax breaks for middle-income households was defeated by Tory MPs.
In addition to delivering dour news on the economy, which the National Statistics Office found was smaller than expected at the end of last year, Osborne is likely to use the budget presentation to warn of Brexit risks. Reports suggest that Osborne was skeptical of the referendum strategy in the first place, but has been forced by circumstances to embrace it. However, rather than unite the party as Cameron had hoped, the referendum appears to be widening the split.”
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