ING: UK job market cools and wage growth is moderate, Bank of England lacks impetus to raise rates this year, pound may face further pressure

(1) Chris Turner, strategist at ING, pointed out that Tuesday’s employment data shows the UK labor market continues to cool, with moderate wage pressure, indicating that the Bank of England has little motivation to raise rates this year. As a result, the pound may extend its losses. (2) The currency market still expects the UK benchmark interest rate to rise by 60 basis points by the end of next year, but Turner said this expectation of a rate hike may gradually fade over the next three to six months, with the timing largely dependent on the trend of energy prices. (3) The UK’s July inflation report, which will be released on Wednesday, will be a key variable. If the data on services sector inflation is on the low side, it will further weaken the case for a rate hike. (4) In terms of exchange rates, the euro rose 0.1% against the pound to GBP 0.8556. ING expects the euro may further touch the GBP 0.8570–0.8580 range.