The British Pound Sterling soared on Tuesday, May 16. against the dollar after data showed UK employment jumped although wage growth has yet to rise sharply, a development analysts said was unlikely to alter the immediate outlook for Bank of England interest rate rises.
The pound rose 0.2 percent on the data to trade flat at $1.3545. It also traded flat versus the euro at 88.01 after weakening before the data was released, Reuters reports.
Traders watched Tuesday’s unemployment and wages data for signs of whether inflation is feeding through to higher wage growth, a likely prerequisite to an interest rate hike.
The data showed annual growth in earnings, excluding bonuses, edged up to 2.9 percent in the three months to March, as anticipated in a Reuters poll, after a 2.8 percent rise in February.
The BoE held interest rates steady last week and cut its growth projections because of weak economic data, sending sterling to a four-month low against the dollar.
Market expectations of a rate raise in August are currently close to 50 percent compared with nearly 60 percent at the start of last week.
“We think the BoE will need to see evidence that the stronger growth is sustained in (coming months) before hiking again. We therefore expect the BoE to wait until November for the next hike,” said Berenberg economist Kallum Pickering in a note.
Sterling had outperformed other major currencies this year but weak data caused partly by bad weather has seen BoE Governor Mark Carney express caution over the state of the UK economy and the British currency has fallen.
