Wednesday, April 16 12:21:45
Sterling rose towards recent highs against the dollar and the euro today after UK data showed the jobless rate falling to a five-year low and wage growth picking up to match inflation for the first time in nearly four years.
The better-than-expected UK data bolstered expectations the Bank of England may have to raise interest rates in the first quarter of next year.
Sterling overnight interbank average rates - the very short-term interest rates which form the basis of lending costs to the wider economy - rose to price in a chance of a rate hike in 11 months, compared with 12 months earlier.
Sterling rose to $1.6818, which was within striking distance of its 2014 high of $1.6823 in mid-February. It was trading at $1.6775 before the data was released.
The euro fell to 82.32 pence after the data from around 82.55 pence beforehand. The euro hit a one-month low of 82.315 pence last week.
Official data showed the unemployment rate fell to a five-year low of 6.9 percent in the three months to February, down from 7.2 percent in the three months to January and below a forecast in a Reuters poll of 7.1 percent.
The Office for National Statistics said total pay growth picked up to 1.7 percent in the three months to February when consumer prices also rose 1.7 percent. It was the first time since April 2010 that the pay growth rate did not lag the consumer price index, the ONS said.
"Sterling has gapped higher across the board after the data," said Alex Edwards, head of the corporate desk at UKForex.
"Markets are now aggressively pricing in an early BoE rate hike. We are now looking at January or February 2015 for a hike. This data is likely to continue lending support and a push towards $1.70 is now on the cards."
The pound is expected to remain buoyant against the euro after European Central Bank President Mario Draghi warned at the weekend that any further strengthening of currency would require further stimulus.
Data on Wednesday confirmed a shock drop in March euro zone inflation to its lowest level since November 2009, keeping pressure on the ECB to intervene should prices not rebound. (Reuters)