GBP flows: Slightly firmer after labour market data

GBP has moved a little higher after the UK labour market data, which was broadly in line with consensus. Average earnings growth edged lower to 4.5% y/y in the 3 months to November based on the ONS data, while more up to date HMRC data showed median monthly pay for payrolled employees rose slightly to 4.0% y/y in December after a sharp dip in November to 2.7% y/y. Payrolled employment growth continues to negative based on the HMRC data while ONS data shows a broadly flat picture. The data provides little reason for any change in market expectations of BoE policy, so extended GBP gains look hard to justify despite the initial positive response. 0.8650 still looks like a strong base for EUR/GBP, and we would expect stabilisation in the 0.8650-0.8700 range near term.