06:13 AM EST, 12/17/2024 (MT Newswires) -- United Kingdom labor statistics published on Tuesday are generally quite hawkish for Bank of England expectations and are leading to a stronger sterling, said ING.

Headline three-month employment slowed only modestly to 173,000 in October, against expectations for only 5,000, wrote the bank in a note. That is, however, an unreliable measure and may be ignored. The same is true for the unemployment rate, which remained at 4.3%.

What is really important for the BoE is the surprise acceleration in wages, stated ING. Both headline weekly earnings and the excluding bonus measure accelerated again above 5.0%.

Crucially, this acceleration is all concentrated in the private sector -- where wages grew 12% on a month-on-month annualized basis -- and where pay trends are more intrinsically linked to wider economic trends.

There are still indications that the jobs market is cooling - such as lower vacancies than pre-COVID -- but clearly, Tuesday's data is offering a reason for hawks to get louder in the Monetary Policy Committee, according to the bank.

Ultimately, there is a compelling case for EUR/GBP to stay below 0.830 in the near term, with risks still skewed to the downside as the BoE will highly likely stay on hold this week, highlighting the striking policy divergence with a dovish European Central Bank, added ING.

Hungary's central bank (MNB) will very likely leave rates unchanged on Tuesday at 6.50%, in line with economists' expectations and market pricing, pointed out ING. While inflation and gross domestic product have surprised to the downside recently, the central bank continues to focus on foreign exchange.

EUR/HUF fell from its highs of around 415 last week, but even current levels in the 408-410 range aren't enough reason to believe in sustainable financial market stability. The focus will be mainly on the press conference communication. In November, the main trigger for the foreign exchange sell-off was one vote for a rate cut, so that shouldn't be a surprise to markets Tuesday.

At the same time, the central bank will present a new forecast. While the GDP outlook should be revised down, inflation may see some upward revisions, especially in the longer term. However, the bank believes MNB will generally try to confirm the hawkish story on Tuesday.

If MNB delivers a clear hawkish message, ING thinks this could be positive for the forint (HUF), which is now vulnerable after Monday's sell-off in the rates market. At the same time, the bank believes the rates market should start pricing in rate cuts again given the weak economy and inflation below expectations.

In addition, the current finance minister will take over the leadership of the MNB in March next year, which markets see as a dovish shift by the central bank, and as such ING sees markets returning to dovish pricing sooner or later.

The HUF should try to stabilize at stronger levels by the end of the year, but medium term ING remains negative with a move to 420 EUR/HUF over the next year.