Sterling near 2-1/2 year lows despite robust wage data
LONDON – Sterling held near a 2-1/2 year low on Tuesday as concerns about a no-deal Brexit dominated sentiment despite data showing wage growth in the United Kingdom rose to an 11-year high.
Britain’s labour market showed unexpected strength in the second quarter with total earnings growth, including bonuses, rising by an annual 3.7% in the three months to June, the highest rate since June 2008.
“The data puts the Bank of England in a tricky spot as it could suggest that businesses are spending more on labour ahead of the Brexit deadline rather than making capital expenditure,” said Fritz Louw, a strategist at MUFG in London.
Against the dollar , the pound edged 0.1% lower at $1.2066 while it was broadly steady against the euro at 92.79 pence.
Strong labour data could put pressure on the Bank of England to hold interest rates. Presently, money markets give a 68% chance of a one quarter point rate cut by end-December.
News that U.S. and Chinese officials had held a telephone call to discuss tariffs and planned another call in two weeks helped ease concerns about the U.S.-China trade war and sent global risky assets rallying, but it did little to boost the pound.
Sentiment towards the pound has taken a beating as some investors have ratcheted up their expectations about a no-deal Brexit while others are expecting increased political uncertainty in the coming months.
Prime Minister Boris Johnson, who took office last month, has pledged to leave the European Union on Oct. 31 with or without an agreement on the terms of Britain’s departure. The EU has so far said it will not renegotiate a deal reached by his predecessor Theresa May but rejected by the British parliament.
ING, one of Europe’s largest banks, said on Tuesday its central assumption was that Brexit would be delayed, with a 40 percent chance of a national election in the United Kingdom.
(Content & Photos Syndicated Via Reuters)
(Reporting by Saikat Chatterjee; Editing by Frances Kerry and Gareth Jones)