UK jobs data hits two-week high as BoE expects more rate hikes

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UK jobs data hits two-week high as BoE expects more rate hikes

LONDON, Oct. 12 - Reuters - Sterling eased against the dollar on Tuesday as UK jobs data came in largely in line with forecasts, keeping expectations for future rate hikes from the Bank of England intact

On Monday, the British Pound hit a two-week high against the greenback on Tuesday on hawkish comments from BoE Governor Michael Saunders who stressed the need to prevent inflation, and fellow policymaker Andrew Bailey, who said households must brace for significant earlier interest rate rises.

The BoE, which is gearing up to become the first major central bank to raise rates since the coronavirus crisis struck, is watching to see how many people became unemployed after the end of the country's pandemic furlough programme.

Data showed British employers expanded their payrolls to a record high in September, while unemployment rate edged down to 4.5% in the three months to August, in line with economists' forecasts in a Reuters poll.

Money market pricing shows around an 8 basis point rate hike from the BoE if its available as early as the Bank's November meeting.

Sterling traded on the day, a touch lower against the dollar at $1.3586 and below the top of $1.3674 on Monday Against the euro, it was also slightly lower, down 0.04% at 85.05 pence.

There is nothing in this data to push back against the very early pricing of the BoE tightening cycle, said ING strategists Chris Turner and Francesco Pesole in a note to clients.

They added that it was the Brexit negotiator Lord Frost who made his UK home brash on Tuesday that left-field risk could come from a speech in Portugal of Britain's chief Brexit negociator.

Here he is expected to push ahead with calls for the EUJ European Court of Justice to be removed from oversight of the Northern Ireland trade deal, they said.

This is a red line for Brussels and more formal push back from the EU may come tomorrow when the EU presents its proposed revisions to the Northern Ireland protocol, the strategists said.

Positioning data from the CFTC on Friday showed the biggest trimming of short positions in the UK in two years, with a shift from neutral to weekly positions on the currency.

Respondents to an October market sentiment survey from Deutsche Bank said they expected the BoE to make a policy mistake on the hawkish side.