The British Pound firmed as a highly-anticipated set of labour and wage data broadly met expectatations.
The Pound pared earlier gains Tuesday as traders responded to a mixed labour market report, which showed wage packets growing slower than was expected in February, while the unemployment rate fell to a new 42 year low.
But businesses still proving reluctant to push pay rates higher, something the Bank of England is looking for to justify raising interest rates in 2018.
The Pound rose strongly against a basket of developed world currencies Wednesday as markets responded to the latest volley of labour market data, which showed UK wages growing faster than expected during January.
The outlook for Pound Sterling brightened Monday when an IHS Markit survey showed a rise in UK wage pressures during the current month, which is something that is sure to grab the attention of Bank of England rate setters later this week.
Unemployment may be at historic lows but that doesn't seem to be increasing pay, as traditional economic theory would suggest.
Wednesday’s data comes at a time when the unemployment rate has held at a 42 year low for five months and wages have seen their longest run of uninterrupted growth since before the financial crisis.
The UK is enjoying a heyday of full employment according to recent data and this will push up wages soon, say economists, but this may not be the whole story suggest examples from other countries.
Markets will now have one eye on the Bank of England after Wednesday's labour market data reinforced expectations that a pickup in wages is underway.
Permanent placements rise at quicker pace as temporary billings continue to expand sharply, meanwhile demand for staff moderates slightly but remains robust.
The squeeze on UK wage packets has eased. Markets will now focus on Thursday's Bank of England meeting and European Council summit.
UK labour market statistics form the economic highlight for Pound Sterling today.
Expectations for a Sterling-supportive reading from today's tranche of labour market data are low.
"The latest labour market figures provided some signs that the tightening in the labour market may be leading to a recovery in wage growth at long last."
Pound Sterling faces up to the first real economic data release of the week on Wednesday, July 12 in the form of employment and wage data from the ONS, due for release at 09:30 B.S.T.
The British Pound was buoyed by the release of stronger-than-forecast inflation data on June 13, next up on the docket are employment and wage earnings data.
The focus today for Pound Sterling will remain on UK economic data.
Of importance for Sterling will be the release of average earnings data (with bonus) which is expected to have shown growth of 2.2%.
Pound Sterling will be hoping for calmer waters in mid-week trade following the wild ride experienced so far this week.
The consequences of Brexit have still not fully fed through into the economy, say UBS, but after Article 50 is triggered at the start of 2017 the full effects are expected to depress growth.
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