GBP: CPI key amid heavy data calendar
The UK faces a heavy data calendar this weak and the CPI print for June will be the key release. We are looking for a flat 3.3% reading but the market is expecting a sharp rise in prices, reflected in a 3.6%. Labour market reports will also be out, but in the short-term the BoE will be worried about rising labour costs and its associated inflationary effects, rather than any softness in job creation. The ILO unemployment rate is expected to stay at 5.3% while we expect average earnings (incl. and excl. bonuses) in May to rise by 4.0% y/y. The BoE is the only central bank in European majors where we do not expect another hike by year-end, especially in the face of its economic difficulties. EURGBP has rebounded to above 0.80 and as other central banks in the region look to hike in Q3, we still expect the GBP to stay under pressure. Ahead today, PPI input and output numbers are due.