British Pound: Labour softness tempers BoE hikes – MUFG

MUFG’s Derek Halpenny highlights growing signs of United Kingdom (UK) labour market weakness, including a sharp HMRC jobs drop and elevated HR1 redundancy notifications, which could influence Bank of England (BoE) policy. While another month of soft data may challenge imminent rate hikes, Halpenny still expects reduced BoE tolerance for the energy shock to ultimately support the Pound (GBP) versus the US Dollar (USD).

UK jobs data challenges tightening path

"The focus today is very much on the US labour market, but we continue to see evidence that suggest the UK jobs market is weakening that could have implications for the BoE and how aggressively it may need to respond to the building inflation risks."

"However, the deterioration in labour market conditions in the HMRC data looks to have been backed up by data from the UK Insolvency Services that publishes data from HR1 forms that companies submit when 20 or more redundancies are planned at one company."

"All that said, a look at the monthly data to April this year compared to the same period in 2025 indicates a roughly similar total of potential redundancies reported through the HR1 form and hence while it is worth monitoring given the latest four-week total, it does not necessarily signal an overall worsening yet to UK labour market conditions."

"Another month of weak data would likely place further questions on any imminent rate hike, especially if crude oil prices remain at these lower levels."