UK wage growth lags inflation even as jobless rate hits new low

Britain's Prime Minister Theresa May attends a press conference in 10 Downing Street London

The pound, which hit a new post-Brexit high against the dollar on Tuesday morning, was little changed after the release. Sterling fell as low as $1.20 at the beginning of 2017, having traded at close to $1.50 prior to the vote. Tuesday's figures showed there were 1.42 million unemployed people in Britain in the three months to February, 16,000 fewer than the previous three-month period, and that the unemployment rate was at 4.2 percent, its lowest since 1975. With unemployment at its lowest level since the 1970s, employers have begun raising pay for staff more quickly, though by less than increases of about 4 percent a year before the financial crisis. "More interestingly, the pound is now also the best performing G10 currency versus the euro", says Derek Halpenny, European head of global markets research at MUFG.

Dollar weakness after uncertainty about USA trade policy has also been a contributory factor, traders said.

Sterling was flat against the euro. Meanwhile, the British currency actually posted a minor loss against the Euro past year.

Anticipation of a rate hike mounted after the BoE warned in February that it could raise rates further and faster than markets were gave it credit for if the United Kingdom inflation picture evolved in line with its most recent forecasts. Since then, inflation has fallen faster than forecast, down from 3% to 2.7%, but the outlook for wage growth has firmed. Earnings were up 2.8 per cent, the Office for National Statistics said, while inflation drifted back to 2.7 per cent. The next reading is due on Wednesday 18, April. Central banks in many rich nations have been puzzled by the failure of wages to rise more quickly as unemployment falls, something they link to factors ranging from increased use of technology by firms to growth in the number of insecure jobs.

Britain's currency has been supported in recent months by expectations of a Bank of England interest rate hike and growing hopes about a Brexit deal.

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