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Labour market data due at 7:00GMT

UK DATA
  • There may be more focus on the average weekly earnings number today which is expected to increase for both including and excluding bonuses. The Bank of England is likely to pay attention to this number as it gives an indication of how much the second round effects of inflation are feeding through to wage growth and can be used as a forward looking indicator.
  • Economists are fairly split on the employment change in the ILO data, with the median expectation in the Bloomberg survey coming in at zero (but in a range from -80k to +50k). This would correspond with the unemployment rate either remaining static at 3.7% or seeing a second consecutive one tenth up tick to 3.8%.
  • The monthly HMRC payrolled employees reading is expected to continue to tick up in December, however.
  • Looking ahead to the February meeting, there is currently around 43bp priced in (with between 40-50bp priced consistently since the December MPC meeting). This corresponds to around a 70% probability of a 50bp hike priced.
  • There is 74bp cumulatively priced by March and the terminal rate pricing now peaks in August at a cumulative 99bp.
  • Although there is potential for pricing for the February meeting to move on this data (with both 25bp and 50bp in play in our view), we think that there will be more sensitivity in terminal rate pricing, particularly to any surprises in wage data. We also think that the pound will be more responsive to moves in the terminal rate.
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