The pound plunged against most peers after the Bank of England Governor Mark Carney signaled that the latest wage report was not as strong as the central bank had expected, lowering bets that interest rates should rise soon.
The pound declined from its strongest level in over five years against the dollar after Carney said more slack in the economy should be utilized before the central bank can consider raising interest rates. The U.K. currency declined 0.2 percent to trade at 1.6997 as of 10:47 a.m. in London after earlier surging to $1.7063 a week earlier, the most since October 2008. The pound fell 0.3 percent to 80.13 pence per euro.
“It’s notable that Carney focused on the lack of wage growth,” Peter Kinsella, a London-based foreign-exchange strategist at Commerzbank AG told Bloomberg. “As a result, there’s been seen some marginal position shifting with sterling weakening. If wage growth continues to disappoint, the BOE will have to take that into account.”
The sterling has advanced 7.8 percent so far this year, making it second-best performing currency out of the 10 advanced-economy currencies monitored by Bloomberg Correlation-Weighted Indexes.
Wages adjusted for bonuses grew by a much slower 0.9 percent in the three months ended April, up from 1.3 percent in the first three months of the year, data released on June 11 showed. Yields on 2-year gilts declined 0.02 percentage point or two basis points to 0.86 percent after earlier surging to 0.93 percent the previous week, the most since June 2011. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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