{"id":99972,"date":"2024-12-18T10:48:45","date_gmt":"2024-12-18T10:48:45","guid":{"rendered":"https:\/\/en.econostrum.info\/?p=99972"},"modified":"2024-12-18T10:48:48","modified_gmt":"2024-12-18T10:48:48","slug":"uk-wage-growth-boosts-sterling","status":"publish","type":"post","link":"https:\/\/en.econostrum.info\/uk-wage-growth-boosts-sterling\/","title":{"rendered":"UK Wage Growth Boosts Sterling Amid Economic Uncertainty"},"content":{"rendered":"\n<p>The <strong>British pound<\/strong> experienced a slight rise on Tuesday, bolstered by <strong>higher-than-expected wage growth<\/strong> in the United Kingdom for the three months leading up to October. The data increased market speculation that the Bank of England (BoE) might delay rate cuts in 2024, providing support for sterling against major global currencies.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Wage Growth Surpasses Expectations<\/h2>\n\n\n\n<p>According to the<a href=\"https:\/\/www.ons.gov.uk\/\" data-type=\"link\" data-id=\"https:\/\/www.ons.gov.uk\/\" target=\"_blank\" rel=\"noopener\"> <strong>Office for National Statistics (ONS)<\/strong><\/a>, average weekly earnings excluding bonuses rose by <strong>5.2%<\/strong> in the three-month period ending in October compared to the same period in the previous year. This figure surpassed the <strong>5.0% growth<\/strong> predicted in a Reuters poll of economists.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>This growth rate is considered a key metric influencing monetary policy decisions.<\/li>\n\n\n\n<li>It reflects sustained wage pressures despite signs of a slowing economy.<\/li>\n<\/ul>\n\n\n\n<p>The news follows concerns about persistent inflation, which has led the BoE to maintain its cautious stance on adjusting interest rates. Market participants are now looking toward the BoE&#8217;s <strong>monetary policy announcement<\/strong> on Thursday, where the <strong>current rate of 4.75%<\/strong> is widely expected to remain unchanged.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Sterling&#8217;s Performance Against Major Currencies<\/h2>\n\n\n\n<p>The pound showed resilience on Tuesday, climbing <strong>0.1% to $1.2693<\/strong> after recovering from a session low of $1.26685. This performance underscores the currency&#8217;s ability to weather headwinds tied to domestic economic challenges.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Year-to-Date Comparisons :<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Against the US dollar<\/strong> : The pound is down <strong>0.3%<\/strong>, but remains the best-performing major currency relative to the dollar.<\/li>\n\n\n\n<li><strong>Against the euro<\/strong> : The pound has gained approximately <strong>4.5%<\/strong> in 2024.<\/li>\n\n\n\n<li><strong>Against the offshore Chinese yuan<\/strong>: The pound leads, with the yuan trailing by a <strong>2.3% loss<\/strong> in value.<\/li>\n<\/ul>\n\n\n\n<p>This year&#8217;s strength has largely been attributed to the &#8220;higher for longer&#8221; policy theme, where <strong>UK interest rates<\/strong> are expected to stay elevated for a prolonged period compared to other regions.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">UK Bond Yields Outpace Global Counterparts<\/h2>\n\n\n\n<p>Benchmark <strong>10-year UK government bond yields<\/strong> have risen by nearly <strong>1 percentage point<\/strong> this year. In comparison :<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>US 10-year Treasury yields<\/strong> climbed by <strong>54 basis points<\/strong>.<\/li>\n\n\n\n<li><strong>German 10-year bond yields<\/strong> increased by just <strong>20 basis points<\/strong>.<\/li>\n<\/ul>\n\n\n\n<p>The sharper increase in UK yields highlights a more pronounced tightening in financial conditions, supporting sterling&#8217;s relative strength.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Emerging Weakness in the UK Economy<\/h2>\n\n\n\n<p>Despite upbeat wage data, the broader economic landscape in the UK is showing signs of strain. Key indicators include :<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>A <strong>second consecutive month of economic contraction<\/strong> in October.<\/li>\n\n\n\n<li>A weakening labor market marked by job cuts and declining vacancies.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Expert Insight :<\/h3>\n\n\n\n<p>Kathleen Brooks, Research Director at <strong>XTB<\/strong>, noted the dual nature of the situation. \u201cIn the longer term, although wage data was stronger than expected, we think that the economic backdrop is weakening, which will lead to a loosening of the UK labor market over the course of 2025,\u201d she stated.<\/p>\n\n\n\n<p>Brooks also emphasized the potential for markets to underestimate <strong><a href=\"https:\/\/en.econostrum.info\/boe-governor-further-interest-rate-cuts\/\" data-type=\"post\" data-id=\"2869\">the BoE<\/a><\/strong>&#8216;s likelihood of cutting rates next year as economic pressures mount.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Monetary Policy and Rate Cut Expectations<\/h2>\n\n\n\n<p>Money markets currently anticipate that the BoE will reduce rates by approximately <strong>70 basis points in 2024<\/strong>, compared to :<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>A similar <strong>70 bps reduction<\/strong> forecasted for the US Federal Reserve.<\/li>\n\n\n\n<li>An expected <strong>120 bps cut<\/strong> by the European Central Bank.<\/li>\n<\/ul>\n\n\n\n<p>While wage growth has bolstered short-term prospects for sterling, the longer-term trajectory may depend on how the <a href=\"https:\/\/en.econostrum.info\/boe-governor-further-interest-rate-cuts\/\" data-type=\"post\" data-id=\"2869\">BoE balances inflation<\/a> concerns with slowing economic activity.<\/p>\n\n\n\n<p>The <strong>stronger-than-expected <a href=\"https:\/\/en.econostrum.info\/wage-growth-slows-while-unemployment-edges-up\/\" target=\"_blank\" data-type=\"post\" data-id=\"2505\" rel=\"noreferrer noopener\">wage growth<\/a><\/strong> in the <strong>UK<\/strong> highlights the delicate balancing act for <strong>policymakers<\/strong>. The data has bolstered <strong>sterling<\/strong>, raising expectations for a cautious <strong>monetary policy<\/strong> from the <strong>Bank of England (BoE)<\/strong>.<\/p>\n\n\n\n<p>However, signs of economic contraction and a <strong>softening labor market<\/strong> present growing challenges. Decisions made by the <strong>BoE<\/strong> in <strong>2024<\/strong> will significantly influence the trajectory of the <strong>pound<\/strong> and the broader economic outlook.<\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Average weekly earnings in the UK rose by 5.2% in the three months to October, exceeding expectations and intensifying speculation about the Bank of England&#8217;s monetary policy decisions. This wage growth continues to bolster sterling&#8217;s resilience against global currencies.<\/p>\n","protected":false},"author":9,"featured_media":99984,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[1,28],"tags":[],"class_list":["post-99972","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy","category-market-stock","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33","no-featured-image-padding"],"_links":{"self":[{"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/posts\/99972","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/comments?post=99972"}],"version-history":[{"count":3,"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/posts\/99972\/revisions"}],"predecessor-version":[{"id":99993,"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/posts\/99972\/revisions\/99993"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/media\/99984"}],"wp:attachment":[{"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/media?parent=99972"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/categories?post=99972"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/tags?post=99972"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}