By: Michael Boutros, Sr. Technical Strategist
UK unemployment held at 4.9%, still a five-year high, in the employment print that opened a three-day run of central bank risk for the British pound. The Bank of England vote count, rather than the rate decision itself, is what carries the information for sterling, because a hold is already priced and the committee split is not. A softening labor market and an inflation reading expected to tick higher on both the headline and core measures pull the Monetary Policy Committee in two directions at the same meeting. With the Federal Reserve decision landing first and the U.S. dollar already firm, the British pound enters the sequence sitting on support that has contained it for most of the year.
Michael Boutros is a Senior Market Analyst at StoneX Media with more than 20 years spent trading foreign exchange, commodities and equity indices across trading desks. He follows sterling through a structured multi time frame approach with a medium-term, event-driven focus, covering the central bank decisions and inflation data that shape the British pound.
"Obviously the vote count on the MPC will be critical to determine where exactly the committee is sitting with regards to the future of monetary policy", says Boutros. The Bank of England is not expected to change rates at this meeting, which shifts the market-relevant content of the release from the decision to the distribution of votes on the Monetary Policy Committee. A hold that arrives with a wider split reads very differently from the same hold delivered near-unanimously, because the split is what prices the path rather than the level. The British pound's response is likely to be built on the vote breakdown and the accompanying language, both of which sit outside what markets have already discounted.
The UK employment print showed unemployment holding at 4.9%, a five-year high, with the claimant count coming in at 27.8 thousand. That combination is what narrows the Monetary Policy Committee's room, and Boutros notes that "this softness in the labor markets in the UK really making the decision a little bit more difficult for the Bank of England, which is trying to combat this rising inflation" . Conversely, the inflation side is firming, with headline consumer price inflation expected to move from 2.9% to 3.1% and the core reading from 2.6% to 2.7%. Specifically, that leaves the committee weighing a cooling jobs market against prices moving the wrong way, which is precisely the tension a vote count exposes and a policy hold hides.
--- Written by Frédéric Guétin, StoneX Media Producer
--- Expert: Michael Boutros, StoneX Media Senior Market Analyst
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