Sterling wobbles on earnings data
The sterling fell slightly against the dollar and euro yesterday after weaker-than expected earnings data dampened raising expectations of a Bank of England rate rise in November.
This morning sterling was worth $1.8771, 1.4807 and 220.8800 yen, following Office for National Statistics (ONS) data on earnings and unemployment.
Average pay growth rose 4.4 per cent in the quarter to July, slightly below analysts' expectations of 4.5 per cent but nonetheless the fastest growth since April 2005.
Howard Archer, chief economist at Global Insights, commented: "The underlying earnings data are actually largely benign, even though the three-month headline growth rate rose to a 15-month high of 4.4 per cent in July influenced by bonus payment factors.
"Significantly, underlying annual average earnings growth was just 3.7 per cent in the three months to July, while it rose just 3.3 per cent in July itself. This is well below the 4.5 per cent level generally considered to be consistent with the Bank of England's 2 per cent inflation target."
He added that current muted earnings data are "unlikely in themselves to deter the Bank of England from hiking interest rates again in November".
The case for a rate rise was strengthened by separate ONS data showing that unemployment benefits claims fell unexpectedly in August by 3,900 to 950,100.
Mr Archer commented: "The first fall in claimant count unemployment in 18 months in August indicates that the improved growth in recent months has finally been sufficient to generate enough jobs to meet the expanding labour force.
"Nevertheless, we suspect that unemployment will move back up over the coming months as growth fails to sustain the second quarter performance."