This morning eyes will be on the first release of UK unemployment data since the decisive General Election result, with the headline rate due to decline from 5.6% to 5.5%. Whilst there was a little dip in some of the UK economic data during Q1, there’s been a pick up recently and employment is expected to accelerate once again. The all-important wage growth figure is expected to show average earnings rising from 1.8% to 2.1%, which is all encouraging for the newly formed government, although really it’s not much more than a continuation of the good economic news that was becoming the norm ahead of the election. This data has the potential to further sterling’s gains, adding to the upside momentum it established after yesterday’s better than expected industrial production and manufacturing data.
Attention will also be given to the arguably more important Bank of England quarterly Inflation Report due out at 10.30am UK time which will give the BOE’s projections for growth and inflation. Here it will be interesting to see how the jump in oil prices, the ongoing recovery and the latest round of pay settlements will impact inflation forecasts. On the all important 2 year inflation horizon the BOE has remained relatively hawkish so, it is most likely that the governor Mark Carney will reiterate the next move in interest rates is most likely to be up, but more detail on the timing will not be forthcoming.