U.K. ILO Unemployment to a 12-Year High, GBP Hits Session Low

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.