UK labour data was better than expected with September claimant rate rising 0.7k versus the expected 3.0k gain, while the claimant count rate was unchanged at 2.3% from an upwardly revised 2.3% rate in August. The lagging August unemployment rate was unchanged at 4.9%, while average household income in the three months to August came in with a 2.3% y/y rise in both the ex-bonus and with-bonus figures, perkier than the 2.1% median forecast in the case of the ex-bonus number. Inflation, which leapt to a 22-month high of 1.0% in September, is expected to soon exceed income growth and put a squeeze on many households.
GBP perked up on the release and hit eight day highs. Following yesterday’s rebound which was extended on news that the UK government may have to give parliament a vote on the Brexit deal (which is something the government has been against, arguing that referendum is mandate enough). However, the vote was reported to be after negotiations have finished, by which time parliament will be powerless to stop Brexit. The issue is in the High Court now and will likely move to the Supreme Court. This is a shaping up to be a big constitutional issue, if not crisis, for Britain. Parliamentary involvement in drawing up the negotiating position for the EU exit is seen by markets as increasing the odds for a “soft” Brexit rather than the government-favoured “hard” Brexit. Cable logged an overnight low of 1.2256, but with this release it spiked pair north of 1.2300 again. Technically the pound’s downside momentum has waned significantly and we remain Long GBPUSD and Short EURGBP from yesterday’s analysis.
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