Sterling backs off eight-week high as UK wages slow down

Sterling fell in European trade on Tuesday against a basket of major rivals, extending gains for the second straight session against the dollar off eight-month highs on profit-taking, following UK labor data.

Recent data showed wages grew by a slower pace than expected, reducing pressures on Bank of England’s policymakers and bolstering the case for a UK rate cut in June. 

GBP/USD

GBP/USD fell 0.2% to 1.2789, with a session-high at 1.2824, after falling 0.35% on Monday, the first loss in seven days on profit-taking away from an eight-month high at 1.2894. 

The pound rose 1.6% last week against the dollar, the largest weekly profit this year as the dollar lost ground against most rivals. 

UK Wages

Official UK data showed average wages rose by 5.6% in January, below estimates of 5.7%, and below 5.8% in December.

Unemployment rose unexpectedly to 3.9% from 3.8% in the previous reading. 

The number of vacant job positions in the UK fell by 43 thousand in the three months ending February to 908 thousand, still remaining above the pre-Covid era.

Wages remain too high for the economy to achieve the 2% inflation target smoothly, however the declining trend is clear and could convince the BOE eventually to cut interest rates in June as many analysts expect.