UK: Jobs data in focus after large GBP sell-off - MUFG

Derek Halpenny, European Head of GMR at MUFG, notes that the pound fell sharply yesterday and while a slightly weaker inflation print was cited as the driver, we suspect a more general emergence of Brexit anxiety is also at play.

Key Quotes

“What has become apparent since parliament returned from the summer recess is that there are clear differences between No.10 and Chancellor Hammond and those in government that campaigned for Brexit – David Davis and Liam Fox, for example. That raises the prospect of some very difficult times ahead that might well raise anxiety amongst investors over how smooth progress with Brexit might be.

The political side of Brexit will be in focus today with European Commission President Juncker giving his State of Union address to the EU parliament. The markets will be particularly focused on what he has to say about how the EU will move forward with Brexit negotiations with the UK.

The economics side of Brexit will also be in focus with the release of employment and wage data for July and claimant count data for August. The July data might not yet be too revealing about the employment impact of Brexit but the August Claimant count data might be more revealing in seeing the first signs of labour market weakness due to the uncertainty of Brexit. Based on the sharp decline for the pound yesterday, any sign of labour market weakness today could see the pound take another leg lower.”