The GBP strengthened against major currencies after UK labor data showed robust wage growth, exceeding expectations. While unemployment remained steady, the BoE's focus on wage inflation suggests interest rates will likely be kept unchanged.
The Pound Sterling ( GBP ) rises sharply against its major peers on Tuesday after the release of the United Kingdom (UK) labor market data for three months ending October. The British currency strengthens as Average Earnings Excluding bonuses, a key measure of wage growth , rose at a robust pace of 5.2%, faster than estimates of 5% and accelerating from the former 4.9% advance.
Bank of England (BoE) officials closely track wage growth data when deciding on interest rates as it is a major driving force to inflationary pressures in the UK service sector. Meanwhile, Average Earnings Including bonuses also rose by 5.2%, faster than expectations of 4.6% and the former reading of 4.4%. Robust wage growth data has strengthened the British currency, offsetting othercomponents of the labor data release that weren't that GBP-positive. For example, in the three months ending October, the economy added 173K new workers, lower than the former release of 253K, upwardly revised from 219K. The ILO Unemployment Rate came in line with estimates and the prior release of 4.3%. Higher wage growth suggests that UK service inflation could remain high, with fresh inflation data to be released on Wednesday.The core Consumer Price Index (CPI) – which excludes volatile items – is estimated to have grown by 3.6%, faster than the 3.3% advance in October. Such an outcome would cement market expectations that the BoE will leave interest rates unchanged at 4.75% in the monetary policy announcement on Thursday.
Pound Sterling GBP UK Labor Market Wage Growth Bank Of England Interest Rates Inflation
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