U.K. March claimant count was not as poor as expected, with an increase of 73.7k, far less than our survey median for 115k and the claimant rate only rose to 4.5% from 4.3%, against expectations for a rise to 4.6%. The 3m average February ILO rate did rise to 6.7%, however, as expected and up from 6.5%. Though March data was not as bad as expected, the U.K. labor market is deteriorating rapidly, adding downward pressure to wage growth. February average earnings slipped to a mere 0.1% 3m y/y, the lowest reading since comparable records began in 1991, down from 1.8% in January and versus a 1.2% median estimate. However, excluding bonuses, the 3m y/y measure only decelerated to 3.2%, from 3.5% in January, below our 3.4% median survey estimate but still suggesting that deflation fears are exaggerated.
GBP hit fresh session lows after U.K. releases, with Cable trading below 1.4550 and EUR-GBP pushed up towards 0.8875-80 offers. GBP was already on the defensive as early European traders were keen to establish short positions ahead of today’s U.K. budget, with Cable pulling back from 1.4675 and EUR-GBP rallying out of 0.8810-20. The data releases could have been worse, with the U.K. March claimant count rising 73.7k, which was well below the 115k median, which left the rate at 4.5%. U.K. public sector net borrowing hit a new record high of GBP 19.1 bln, while the BoE MPC minutes revealed a unanimous vote for steady rates in April and continued asset purchasing. Ahead of the U.K. budget Cable buy interest down to 1.4525 may provide a modicum of support and further bids are noted at 1.4500 and 1.4470. The impetus for GBP will come from today’s budget, which is expected to result in significant downgrades and a rise in government borrowing. The market is likely to remain short, but short covering may persist later on amid a “buy on the fact” move.