Published: Tue, April 17, 2018
Business | By Kate Woods

Pound climbs to highest since Brexit vote

Pound climbs to highest since Brexit vote

Official figures show that wages in Britain are rising faster than prices, a positive development for households that will likely fuel expectations that the Bank of England will raise interest rates again next month. That's higher than the rate of inflation, which was 2.7% at the most recent reading.

Senior ONS statistician Matt Hughes said: "The labour market continues to be strong, and for the first time in nearly a year, earnings have grown slightly after inflation has been taken into account". The Office for National Statistics said the unemployment rate unexpectedly fell to 4.2 percent, its lowest since the three months to May 1975.

Strong wage growth and unemployment data out this morning are also expected to keep the pound stable today.

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Britons' pay packets grew by 2.8 per cent in the year to February, officially ending a year of real wage falls as salary increases have finally overtaken price rises.

During early trade the pound was up about 0.3% against the dollar to trade at $1.4377 - just above its postreferendum high set in January. Markets expect rates to be raised by 25 basis points next month. "Certainly there's nothing within the labour market numbers to prevent the Monetary Policy Committee from raising interest rates in May", he said. This too is significant because the lower that unemployment falls, the tighter the labour market becomes, which bodes well for wage growth further down the line.

United Kingdom unemployment rate falls once again, dropping from 4.3% to 4.2%.

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"The pound was the standout performer yesterday and is now the best performing G10 currency versus the United States dollar on a year-to-date basis". They are expected to show CPI steady at 2.7%.

Pay is one of the most closely followed measures... Based on the CPIH measure of inflation, which takes more housing costs into account than the CPI, pay growth edged ahead of inflation for the first time since the first three months of 2017, the ONS said.

Rate setters predicted at the time that inflation would remain above the 2% target until at least the first quarter of 2021 and that it would average around 2.9% for the first quarter of 2018.

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