HiFX comments on this morning’s unemployment data
Andy Scott, economist at HiFX, comments on this morning’s unemployment data, said:
“Sterling rallied against both the dollar and the euro Wednesday following stronger than expected figures on UK wage growth. Average earnings rose at their fastest pace in six years in July, showing that the improving labour market is feeding increased wage demands – a sign that employers are willing to pay more to keep existing, or hire new workers.
“The news of individuals seeing strong pay growth in real terms should continue to support domestic demand and economic growth, all the more important when the global growth outlook is weakening. This also tallies with consumer confidence which has recently been at a 15-year high, as people’s improving financial position boosts sentiment.
“Sterling rose more than half a percentage point against the dollar to 1.54, and by the same against the euro to 1.37 as the news supports those at the Bank of England who are signalling rates will need to rise “sooner rather than later.” If the economy continues to grow at a reasonable rate, and wages continue to grow at 3% or more, we could well see the BoE regain its credibility and follow through with a rate hike early next year. If recent history has taught us something though, when it comes to Carney signalling a rate hike, we know not to hold our breath.”