GBP: No inflation, despite continued labour market improvement

UK CPI inflation is likely to remain non-existent in June (Tuesday; consensus: 0.0% y/y) as weakness in core prices persists. However, May wage growth is likely to accelerate further, to 3.2% 3m/y (Wednesday; consensus: 3.3%; last: 2.7%) amid declining unemployment (consensus: 5.5%) and June jobless claims (consensus: -9.5k).

Continued wage price pressures should eventually support the beginning of monetary policy normalization in the UK. However, this week's budget confirmed the new Conservative government's relatively aggressive fiscal consolidation plans and the BoE is in no hurry to hike. 

"We continue to think GBP out-performance versus the EUR will be moderate as tight fiscal policy and institutional risks weigh on UK economic growth and result in more accommodative monetary policy", says Barclays.