GBP climbs as wages remain high
The unemployment rate in the UK has gone down, but wages are still high. However, the growth in wages has been slower than expected.
UK unemployment
The unemployment rate in the UK has gone down, but wages are still high. However, the growth in wages has been slower than expected. This is worrying for the Bank of England because they want to see inflation decrease. During the three months leading up to December, the growth in average weekly earnings, including bonuses, was only 5.8%. This is lower than the peak of 8.5% in the summer and 6.7% in the previous three months. The Central Bank analysts were a bit surprised that the rate of earnings growth slowed less than they predicted.
The Bank of England
The Bank of England is closely watching wages because they are concerned that if pay increases too quickly, it could make it harder to bring inflation back to their target. Companies might pass on higher labor costs to consumers, which would make things even more complicated. In December, the inflation rate was 4% according to the Consumer Price Index.
GBP
This information has had a significant impact on the value of the GBP. After the wage data was released, the pound increased sharply against the US dollar. This suggests that the market no longer expects the Bank of England to cut interest rates at their next meeting. The pound's value against the dollar is now at its highest level since February 2nd. Additionally, the pound has also strengthened against the euro, reaching its highest level since August 23rd of the previous year. It has been a positive day for the pound in trading.
EUR/USD
In simpler terms, the UK unemployment rate is down, but wages aren't growing as fast as expected. This is an issue because the Bank of England wants to lower inflation, but rapid wage growth could make that more difficult. The news about wages has caused the British pound to increase in value against the EUR/USD.
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