Sterling Falls as UK Job Vacancies Decline and Wage Growth Slows
Sterling has experienced a 0.4% drop against the dollar, reaching $1.2169, as new data reveals a decline in job vacancies and a slowdown in workers’ regular pay growth. The softer labour market conditions have increased the likelihood that the Bank of England (BoE) will maintain the current interest rates. Against the euro, the British currency also fell by 0.4% to 86.75 pence, close to the two-week low recorded on Monday.
The data indicates that job vacancies have decreased, while average earnings in the three months leading to August were 7.8% higher than the previous year, excluding bonuses. This figure represents a slight decline from the previous three-month period, marking the first fall since January. Some labour market data, including the unemployment rate, has been delayed until next week.
The BoE is closely monitoring the labour market, particularly earnings figures, to determine whether they need to resume raising interest rates. In September, the central bank decided to keep rates on hold after 14 consecutive hikes. Joshua Mahony, the chief market analyst at Scope Markets, commented on the recent decline in sterling, saying, “The pound has suffered sharp losses this morning, following the release of annual earnings data that saw wage growth outstrip inflation for the first time since October 2021. Nonetheless, with the BoE undoubtedly concerned at the rise of wages over recent months, today’s decline eases concerns that we could see another rate hike in the near term.”
Experts at Nomura have suggested that the weakening job data could impact the Monetary Policy Committee’s decision on interest rates. In a note to investors, Nomura projected that the first rate cut would occur in the third quarter of next year, while based on the latest data, they believe the hiking cycle is over.
Money markets now predict a 77% chance that the BoE will maintain rates in its upcoming meeting in November. The release of Britain’s consumer price index (CPI) on Wednesday has also been identified as another significant macroeconomic event this week.
More detail via Yahoo! Finance here… ( Image via Yahoo! Finance )