GBP: Asymmetric Risk For GBP On UK Data This Week But Broadly Positive - Barclays

Barclays Capital Research sees asymmetric risks for GBP in the first half of the week.

"Inflation and employment data create two-sided risks to GBP this week. We forecast that CPI will print at 3% y/y (Tuesday; consensus: 3.0%; previous: 2.9% y/y). Any upward surprise could see a resumption of GBP strength as markets price in a steeper path of BoE rate hikes after November, which about 85% currently priced.

Weaker inflation or a marked deterioration in the labour market – we expect weekly earnings to have increased 2.1% 3m/y (Wednesday; consensus: 2.1%; previous: 2.1%), while unemployment should be unchanged at 4.3% (Wednesday; consensus: 4.3%) – could jeopardize part of the BoE’s support for GBP," Barclays notes. 

More broadly, Barclays argues that given the widely negative expectations, risks still at the margin look skewed to the upside for GBP in the near term.