Sterling ticks higher before UK wages data

Lucy Hill
June 15, 2017

The data for retail sales, producer price and consumer price inflation are also set to be released this week.

United Kingdom inflation hit an nearly four-year high of 2.9% in May, official data showed yesterday, stronger than economists had expected.

Workers' total earnings including bonuses after taking inflation into account fell by an annual 0.4 percent in the three months to April after edging up 0.1 percent in the first quarter.

We had confirmation on Wednesday that for the first three months of the year wages have been falling in real terms.

This is because although raising interest rates would ordinarily be considered a sensible strategy to get inflation down - and inflation is now running at 2.9% which is considerably higher than the Bank of England's 2% inflation target - the economy is simply too fragile right now for Committee members to risk putting rates up.

British government bond futures also see-sawed on the figures and last stood at 128.39, down 17 ticks on the day - similar to their level before the data.

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Sterling has suffered further weakness at the start of this week as investors react to the government's attempts to outline its Brexit stance after a disastrous election for Prime Minister Theresa May.

Sterling snapped a three-day drop against the USA dollar as annual inflation surged to 2.9 per cent in May from 2.7 per cent a month earlier.

The Office for National Statistics said the unemployment rate in the period between February and April held steady at a more than four-decade low of 4.6 percent, in line with the median forecast in a Reuters poll of economists.

Excluding bonuses, nominal earnings rose by 1.7% year-on-year, the weakest increase since January 2015 and compared to expectations for a 2% rise.

"There were smaller upward contributions from increased electricity and food prices".

The Bank of England is widely expected to keep interest ratesat their record low of 0.25% when it makes its latest policy announcement later today.

Other reports by TheDailyFarc

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