Sterling strengthens after UK wage growth beats forecasts

LONDON (Reuters) - Britain’s pound rose against the dollar on Wednesday, after data showing stronger-than-expected wage growth brought some relief to investors concerned about the economic impact of Britain’s decision to leave the European Union.

A pile of one pound coins is seen, in central London June 17, 2008. REUTERS/Toby Melville

Workers’ total earnings including bonuses rose by an annual 2.3 percent in the three months to February, unchanged from the previous period and beating economists’ expectations. The unemployment rate held steady at an almost 12-year low of 4.7 percent, in line with forecasts.

Sluggish wage growth has been cited as one reason the Bank of England is in no hurry to raise interest rates despite inflation holding steady above its 2 percent target for a second month running.

Sterling touched $1.2521, its highest level in nine days, after the data, last trading 0.1 percent higher on the day at $1.2508.

It hit a six-week high versus the euro in the London afternoon, but reversed those gains to trade flat on the day at 84.88 pence per euro.

Lee Hardman, currency strategist with MUFG in London, said the pound was in a consolidation phase for the near term and that economic data was having less of an impact on the currency since last year’s Brexit vote.

“If that’s going to change, it’s only...if the data prompts the Bank of England to shift their policy stance,” Hardman said.

“Unless we see stronger wage data or other kinds of upside risks to inflation developing, then they’re likely to stay on hold for now so that is not enough to trigger any kind of upside risk for the pound in the near term.”

Sterling also recouped some overnight losses against the safe-haven yen, last trading almost flat at 136.93 yen per pound. It was over 1 percent lower against the Japanese currency on the week.

The pound fell to four-month lows versus the yen on Tuesday, as a risk-averse mood - fuelled by worry over U.S. involvement in North Korea and Syria - swept through financial markets.

“The boost in the pound wasn’t just because of the labour market data...but there’s also been a reduction in risk-aversion (in Europe),” said Kathleen Brooks, research director at City Index.

Editing by Louise Heavens; editing by Susan Thomas