Thursday, 12 November 2015 01:06
.52, subdued wages data shrugged off” alt=”Sterling recovers to trade at .52, subdued wages data shrugged off” width=”600″ height=”400″ src=”https://globalrubbermarkets.com/wp-content/uploads/2021/09/sterling-hits-3-month-high-vs-euro-after-uk-core-price-blip.jpg”>LONDON: Sterling rose on Wednesday, shrugging off data that showed UK wages growing at a slower than expected pace in the third quarter, with investors judging it did little to alter expectations of when the Bank of England will raise rates.
Wage growth in Britain was just 2 percent in September, a sharp slowdown from August’s 3.2 percent growth and the weakest increase since February this year. Instead, some sterling bulls focused on the jobless rate, which showed UK unemployment fall to a lower-than-expected 5.3 percent in the third quarter.
The data kept alive expectations that UK interest rates will probably head higher in the third quarter of next year.
“The good news from the report came in the fact that the number of unemployed in the UK has made significant progress over the last years,” said Chris Towner, chief economist at HiFX, a currency broker.
“Overall the economy is steady and calm giving the Bank of England opportunity to continue to monitor and comment without requiring any real action.”
Sterling was up 0.5 percent at $ 1.5200, rising from $ 1.5170 just before the data’s release, and up more than 1 percent from a seven-month low of $ 1.5027 hit on Friday.
It was also higher against the euro at 70.65 pence , not far from a eight-year high of 69.35 pence touched in July. On a trade-weighted basis, the pound is close to 7-1/2-year highs.
Sterling has fallen sharply against the dollar in recent days after the BoE cooled expectations of a rate hike in the near term while a blockbuster U.S. jobs report kept chances of a December lift off by the Federal Reserve very much alive.
Rabobank currency strategist Jane Foley said the UK economy had closer ties to the euro zone than to the United States, and therefore the European Central Bank was more important to the Bank of England than the Fed.
The ECB is expected to expand its already huge stimulus programme in December, which should pressure the euro downwards against the pound, limiting any pick-up in UK inflation and keeping Carney from raising rates for even longer.
“Carney is very wary about this as he signals that they are preparing to hike in the next couple of months.
“Sterling could take off, and then the monetary tightening could be done and then he’s the unreliable boyfriend again,” said Foley, referring to a comment made by a politician last year to describe changes in the BoE’s forward guidance on rates.
