Sterling jumped as much as 0.2% to 1.2530 after wage data in July beat estimates but has quickly reversed as expected due to recession concerns, and it is currently trading mid 1.2500-1.2530. USD/JPY holds mid 146-147 and AUD/USD rises but remains below Monday’s high of 0.6449. EUR/USD is muted around 1.0730 after gaining yesterday, which was the pair’s best performance in two weeks. The Bloomberg dollar Spot Index is steady, after dropping 0.7% yesterday.
UK wage growth stills holds at the record high in three months through July, another sign that inflationary pressures remain and that the BOE’s headache is not over yet, leaving the door open for another 25-basis point rate hike in September. Three-month average weekly earnings rose to 8.5% vs. 8.2% estimate and, three-month average unemployment rate stayed at 4.3%, vs. 4.3% estimate.
In addition, average earnings without accounting for bonuses rose 7.8% YoY, rising at one of the fastest paces since 2001. These figures came in after we have seen the UK labour market starting to cool in recent months, a response to a high borrowing cost regime, with unemployment ticking higher to 4.3% and vacancies continuing to fall. However, we believe this is unlikely to stop the BOE from delivering its 15th consecutive hike, especially as today’s data gives support to the hawkish members of the committee.
