The British pound declined against most other major currencies on Wednesday as the latest labor market figures painted a mixed picture of unemployment and wage growth. Lower expectations of an interest rate hike followed todayâs figures, which further weighed on the British currency.
A fresh report from the UK Office for National Statistics showed that the unemployment rate was at 4.3% in August, which matched expectations. 52,000 people went out of unemployment in the three months leading to August, while 1.4 million remained unemployed. The unemployment rate was the lowest since 1975 despite an increase in the claimant count by 1,700 people, which was more than an estimated rise of 1,000.
The report added that the average earnings index, which includes bonuses, rose by 2.2% in August from a year earlier, which was 0.1% more than what analysts had expected. However, the record low unemployment rate and the gain in earnings were overshadowed by negative real wage growth.
After adjusting average earnings to price inflation, the data showed a decline by 0.4% in weekly earnings or by 0.3% after including bonuses. A report that was published yesterday stated that the consumer price index rose to 3% on a yearly basis in September.
The strong inflation is putting pressure on British consumers, whose wages grew modestly despite an increasingly tight job market. Businesses are yet to respond to the declining supply of job seekers with higher wage offers. The result is a widening gap between real wage growth and inflation.
The Bank of England closely tracks real wage growth as an indication of inflationary pressures to deciding future monetary policy. Todayâs data, coupled with yesterdayâs inflation report, lowered investorsâ expectations of an interest rate hike in November.
Remarks made by Bank of England Governor Mark Carney yesterday showed that policymakers are still debating the strength of the economy and the need for another rate increase. The central bank will be looking for signs of inflation that is produced by growing wages within the United Kingdom before moving to higher interest rates.
GBP/USD traded at 1.3158 as of 14:15 GMT on Wednesday after falling to 1.3151 at 09:15 GMT, the pairâs lowest level since October 12. GBP/USD began trading today at 1.3194. EUR/GBP touched 0.8939, the strongest level since October 12. EUR/GBP started the day at 0.8924.
If you have any questions, comments or opinions regarding the Great Britain Pound,
feel free to post them using the commentary form below.
