Pound surges to new post-Brexit high of $1.42 against the dollar after strong jobs figures

Sterling notched the latest in a succession of peaks over recent weeks, which have been helped by the US currency’s weakness

Ben Chapman
Wednesday 24 January 2018 18:02
Pound surges to new post-Brexit high after strong jobs figures revealed

The pound jumped to a new post-Brexit high against the dollar to $1.42 on Wednesday, after the Office for National Statistics revealed strong employment figures.

Sterling had its strongest day in more than nine months and notched the latest in a succession of highs over recent weeks, which have been helped by the US currency’s weakness.

The number of people in employment in the UK jumped to a joint record high in November, according to official data released on Wednesday. That helped the pound rise by 1.6 per cent on the day, despite the fact there was still scant evidence of a serious pick-up in wages.

The pound is on course for its best month against the dollar since mid-2010, having risen by more than 5 per cent already. Sterling also hit a six-week high against the euro (87p to one euro).

The UK currency is now closing in on the $1.48 level it stood at prior to the June 2016 vote for Brexit. Against the currencies of its biggest trading partners, sterling is at its highest level since mid-2017.

Markets have been pricing in the potential for a messy departure from the European Union, and even a no-deal scenario. The pound has strengthened as the latter eventuality appears to have become increasingly unlikely.

David Davis, the Brexit minister, told MPs on Wednesday that he expects to agree to a transition deal by the end of March.

Traders are also looking for signs that the Bank of England (BoE) may raise interest rates again after November’s hike – the first for more than 10 years.

A rise appeared more likely after Wednesday’s jobs figures, but analysts have said the BoE’s rate-setting committee is looking for signs of pay growth before raising rates again.

The Office for National Statistics reported that average total wages were up by just 2.3 per cent year-on-year in the month, well below the rate of inflation –meaning that, in real terms, pay is still declining. The three month rate of pay growth was unchanged at 2.5 per cent.

The overall data underscores the challenge for the BoE’s interest-rate setters, who tend to regard rising employment and low unemployment as evidence of declining slack in the economy but are waiting in vain for wage growth to pick up in response.

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