Morning from Europe ahead of a BIG inflation day!

UK wage measures surprised on the upside and the change in payrolls is back in positive territory. This is an interesting backdrop ahead of the UK CPI report tomorrow, and it furthermore rhymes with the signals seen in US wage data lately.

UK Services inflation is expected to print at -0.6% MoM, which remains seasonally hot and far above the 0.25% MoM (in seasonally adjusted terms) needed to bring inflation back towards target levels in the service sector.

Last year in January, the UK services report came in soft in January despite a strong claimant count and a decent job creation. Average weekly earnings printing at 5.8% this morning is consistent with a softening of the Service CPI pressure, but only marginally so.

Our full UK CPI preview was released here.

Chart 1: Will UK wages drag down inflation?