UK Avg Wk Earnings 3M YY* (Dec) 5.8% vs. Exp. 5.6% (Prev. 6.5%, Rev. 6.7%)

ONS: 

• "Nominal earnings growth remains strong, although it has eased a little in recent periods."


• "Real pay growth continues as inflation continues to fall. Annual growth in real terms (adjusted for inflation using the Consumer Prices Index including owner occupiers' housing costs (CPIH)) for total pay rose on the year by 1.4% in October to December 2023, and for regular pay rose on the year by 1.8%."


• ONS' McKeown "in cash terms earnings are growing more slowly than in recent months, but in real terms remain positive thanks to falling inflation"

Reaction details (07:05)

• Overall, the data leans hawkish and as such immediate upside was seen in GBP alongside pressure in EGBs (Gilts yet to open).

Specifically:

• 
  GBP/USD lifted from 1.2615 to 1.2640


• 
  Bund Mar'24 fell from 133.55 to 133.44 in an immediate move, extending thereafter to a trough of 133.28.

Market Pricing, via Reuters (opened at 07:30GMT)

• March -1bp (prev. -2bp)


• May -6bp (prev. -8bp)


• June -15bp (prev. -18bp)


• August -27bp (prev. -31bp)


• December -72bp (prev. -78bp)

Analysis details (07:21)

• A hawkish release which will not be welcome by the dovish-end of the BoE's MPC but speaks to some of the concerns around inflation persistence that the hawks have been highlighting, particularly the real-terms increase in wages over the last few months. Overall, adds conviction to the table-mountain approach in the near-term.


• BoE's Bailey on Monday made clear that the emphasis is on forward-looking data and as such wage dynamics within PMIs for instance might get a larger weighing, particularly given the issues ONS is currently having with its labour data. On that, ONS caveats that the release should be "treated as a provisional estimate and is likely to be revised...".


• Later in the week we get the January inflation print where the headline is expected to tick up, core ease a touch while the BoE has already flagged that the key All Services figure is expected to lift to 6.6% Y/Y (prev. 6.4%). Thereafter, December's GDP could place the UK into a recession, though this will be very mild in nature and Bailey has already said he wouldn't put much weight on this as we are now seeing signs of an upturn.

13 Feb 2024 - 07:00- Fixed IncomeData- Source: Reuters