Currency Note Sterling

Sterling benefits from wage growth

By Ricky Bean February 19th, 2015

A positive day for sterling saw it reverse its poor start to the week and make gains across the board, hitting a fresh seven-year high against the euro. Minutes from the Bank of England (BoE)’s latest policy meeting revealed little in the way of surprises, with confirmation that they see inflation accelerating quickly in 2016 – these echoed BoE Governor Mark Carney’s comments from last week.

On another note, labour market data released on Wednesday showed that UK unemployment in January fell to the lowest level since November 2008. In addition, wage growth was shown to have increased 2.1% over the past 3 months when compared to the previous year. With the BoE close to raising interest rates last year, sluggish wage growth was one of the key factors that prevented them from pulling the trigger. A sustained increase in wage growth will increase the pressure on the BoE to consider raising interest rates this year rather than next.

A quiet day for sterling lies ahead today, with markets likely to be reactive to both last night’s release of minutes from the latest meeting of the US Federal Open Market Committee (FOMC), and the upcoming minutes from the European Central Bank (ECB)’s last policy meeting.