The pound accelerated to a 22-month high versus the euro after the Office for National Statistics reported that U.K. unemployment rate plunged to its lowest level since 2008, fuelling speculation on when interest rates will be increased.
The U.K. currency appreciated 0.2 percent to trade at 79.02 pence per euro as of 11:32 a.m. in London after earlier rising to 78.97, its highest level since September 2012. The pound fell 0.1 percent to $1.7132 after earlier touching $1.7192 on Tuesday.
The sterling’s further rise was weighed by another report that indicated that wage growth grew slower than expected. Wages grew 0.3 percent in the quarter through May, the slowest since May 2009, down from April’s reading of 0.8 percent. When adjusted for bonus payments, the wage increases slowed to 0.7 percent, the weakest level since records started being kept in 2001, compared with 0.9 percent a month earlier.
“The U.K. economy is on every measure outperforming euro land,” Nick Parsons, a London-based head of research for U.K. and Europe at National Australia Bank Ltd. Spoke to Bloomberg. “The fall in the jobless rate is clearly good news. Slowing wage growth is a temporary statistical phenomenon, which will be reversed. This is an opportunity to reload with sterling longs.” A long position is a bet an asset will appreciate in value.
The Office for National Statistics said the U.K. unemployment rate declined to 6.5 percent in the quarter through May, compared with 6.6 percent in the three months through April. The unemployment claims slid 36,300 in June from the previous month, topping analysts’ forecasts. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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