Sterling edges higher as UK wage growth picks up speed
LONDON: Sterling edged up just a touch yesterday as data showed British pay had picked up a little speed in the three months to October, but employment fell again, suggesting employers are turning more cautious as Brexit nears. The numbers showed workers’ total earnings, excluding bonuses, rose by an annual 2.3 percent during that period, compared with 2.2 percent in the three months to September. That beat economists’ expectations for no improvement, but was still well below the inflation rate.
The pound got only a temporary lift on Tuesday after numbers showed British consumer price growth unexpectedly rose to 3.1 percent in October, the highest level in nearly six years in November, tightening a postBrexit vote squeeze on households whose spending is the main driver of the country’s economy. This week’s data was seen as unlikely to affect how soon the Bank will raise interest rates due to lagging wages and also because a key reason for the spike in inflation is the temporary effect from the plunge in the pound since the vote for Brexit.
“The real wage squeeze continues, and that has a dampening impact on the economy and growth, given the UK economy’s dependence on consumption,” said Societe Generale currency strategist Alvin Tan.
Sterling traded 0.3 percent up on the day at $1.3350, off a two-week low of $1.3303 hit on Tuesday. Against the euro, the pound climbed a quarter of a percent to trade at 87.98 pence. Yesterday’s data also showed the unemployment rate held unexpectedly at its four-decade low of 4.3 percent, against expectations for a further decrease to 4.2 percent in a Reuters poll of economists.
“Britain’s once mighty rate of job creation is waning fast. The number of unemployed people is still falling, but that can hardly be considered a win as many of them are leaving the workforce rather than entering work,” said Mariano Mamertino, an economist at job site Indeed. The BoE meets on Thursday and is widely expected to keep rates unchanged at 0.5 percent.
Investors are watching mostly for signals from the central bank about how soon rates will rise again. Traders are also watching out for any Brexit developments.
Prime Minister Theresa May’s control of the exit process will undergo its stiffest parliamentary test yet on Wednesday, when she faces a showdown with rebels in her own Conservative Party over the laws that will take Britain out of the EU. — Reuters