UK Wage Growth Expected to Ease, Pound Steady

The British pound is showing limited movement on Monday. In the European session, GBP/USD is trading at 1.3455, up 0.05% on the day.

The Bank of England is keeping a close eye on two key fronts as it charts a rate path – inflation and employment. The BoE lowered rates last week in a decision that raised a lot of eyebrows since it took an unprecedented two rounds of voting to reach the decision. The close 5-4 vote points to dissension among MPC members as how best to proceed.

Four members voted to hold rates and they can defend their case by pointing to rising inflation. The five members who voted in favor of cutting rates were more focused on the weakening labor market, especially slowing pay growth.

UK wage growth expected to ease

Wage growth will again be in focus on Tuesday, with the release of the employment report. Wages including bonuses is expected to drop to 4.7% in the three months to June, down from 5.0% in the previous release. The unemployment rate is expected to remain steady at 4.7%, the highest level in almost four years.

The BoE meets next on September 18 but the three-way split in the August decision will make it difficult to predict what will happen at the September meeting. Inflation has been moving higher but most members still voted in favor of a rate cut, focusing more on the weakening labor market than on rising inflation.

In the US, it’s a very light calendar with no tier-1 events. On Tuesday, the US releases CPI for July, which is expected to tick up to 2.8% from 2.7% in June.