U.K. wages rose at their fastest pace in more than six years and the unemployment rate unexpectedly dropped, suggesting inflationary pressures are building in the labor market. Sterling jumped on the news.
GBP/USD was last at 1.5423, up 0.52%.
EUR/GBP was last at 0.7287.
Pay excluding bonuses climbed an annual 2.9 percent in the three
months through July, the highest level since early 2009, the Office for National
Statistics said earlier Wednesday.
Total pay growth also rose to 2.9 percent. The jobless rate fell to 5.5 percent, matching the lowest since 2008, from 5.6 percent in the second quarter.
As companies have to raise wages to attract workers, spare capacity in the labor market is the essential metric for the Bank of England, since the Monetary Policy Committee considers when to end more than six years of record-low borrowing costs. So far, declining oil prices are suppressing inflation, leading analysts to expect the BOE will keep the benchmark rate at 0.5 percent until early 2016.
Philip Rush, an economist at Nomura International Plc in London, said that the dip in the unemployment rate and rise in pay will likely be the most significant aspects for the committee. Should the data continue to improve, some members of the committee “are likely to find enough comfort here to vote for a hike in November, global things notwithstanding.”
