UK acting like an EM?
The UK employment report was soft, with unemployment ticking higher to 3.5%, up from 3.4%. However, the wage growth continues to increase. Wages excluding bonuses rose to 5.7%, up from 5.5% and ahead of the consensus of 5.6%. Even with these 2 conflicting signs in the labor market, I think the BoE will continue to hike rates aggressively in order to bring down inflation. As compared to counter-party - US, it is somewhat confirmed that the labor market is not main contributor to inflation, and with signs of inflation peaking in the US, rate hikes will be less aggressive as compared to the UK. Therefore, we could expect the pound to continue to outperform the dollar. That being said, the UK is trading like an EM now, therefore, there is unlikely to be a sharp spike or rally in the pound solely based on the mentioned. We should continue to monitor other macro indicators of the economy.
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