Pound Sterling Today: Sticky Wages Paper Over Job Losses
- Written by: Gary Howes
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The British pound finds some support on news UK wage growth surprised to the upside.
The ONS said the UK lost 43K payrolled jobs in December, a deterioration from -33K in November.
However, wage data surprised to the upside, coming in at 4.7% y/y in the three months to November, defying expectations for a fall to 4.6%.
For the pound, those sticky wage numbers will counter the negative payroll figures:
The pound to dollar exchange rate rose to 1.3434 in the minutes following the release of job data and we see a small post-data lift in the pound to euro exchange rate to 1.15.
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The data did not provide the kind of surprise required to materially alter the path of UK interest rates: current market expectations suggest the Bank will cut interest rates by 25 basis points by April. There's no indication that it needs to cut interest rates as soon as February.
This means the impact on sterling will be relatively contained.
Were the data poor enough, the odds of a February cut would have risen and the pound fallen.
The Bank of England will note the sticky nature of the wage data, judging that it is not consistent with inflation falling back to the 2.0% target on a sustainable basis, and therefore it is worth waiting before lowering rates again.
The UK's inflation data is due Wednesday, and this forms the next domestic event for the pound.
In the meantime, the currency is likely to take its cues from global currents, with markets keeping a close eye on an increasingly belligerent U.S. President Donald Trump.
Over the weekend, he threatened tariffs on the UK and a number of EU countries over their refusal to back his plans to acquire Greenland.
The dollar fell in response and the euro gained across the board.
Overnight, Trump threatened a 200% tariff on French champagne over President Macron's refusal to join his Board of Peace.
Tariff threats are flowing thick and fast, which should keep the dollar on the defensive and the euro bid.
