No feelgood factor for Reeves as Iran war snuffs out economic upturn

UK labour data show unemployment rising back to 5.0% in March, payrolls falling 100,000 in April and regular pay growth slowing to 3.4% y/y, highlighting a deterioration in the economic backdrop after the Iran conflict. The article argues the war has dented business confidence and likely delayed the UK’s hoped-for economic upturn, while inflation risks remain elevated ahead of Wednesday’s CPI data. For rates, the key takeaway is that weaker employment and softer wage growth may keep the Bank of England on hold for longer and reduce the odds of an immediate further hike. Deutsche Bank’s Sanjay Raja said the data could “stop the MPC in its tracks,” suggesting policymakers may prefer to wait and assess the impact of the conflict rather than tighten into a weakening labour market. Precious-metals implications are indirect and mixed: higher inflation expectations from the war support gold as a hedge, but a BoE stay-on-hold message and rising UK real-economy stress could also cap risk appetite and keep sterling rates volatile. Near term, Wednesday’s inflation print and any shift in BoE guidance are the main catalysts for GBP/USD and local gold pricing.