Pound Climbs After Wage Gains Deflect Growing Brexit Uncertainty

(Bloomberg) -- The pound extended gains after British wages grew at their fastest pace in nearly a decade, helping to offset concerns over Brexit.

Sterling rose against most of its Group-of-10 peers as data showed that average three-month earnings excluding bonuses rose 3.1 percent and unemployment held at a 43-year low, indicating the economy is operating with little slack. The currency was weighed down earlier by an impasse in Brexit talks, ahead of a European Union summit on Wednesday that was meant to be a deadline to get a deal done.

“Earnings have surprised to the upside, which is even more surprising given Brexit uncertainty,” said Neil Jones, head of hedge fund sales at Mizuho Bank Ltd. “The solid numbers are pushing the pound onto a $1.32 handle.”

Sterling rose 0.4 percent to $1.3200 as of 10:00 a.m. in London. It climbed 0.3 percent to 87.81 pence per euro. Ten-year gilt yields rose one basis point to 1.62 percent.

Despite the stronger wage numbers, the Bank of England is not expected to increase interest rates before Britain leaves the EU in March. Money markets are pricing the next rate move for August 2019.

U.K. and EU officials are not expecting any breakthrough this week, with the Irish border remaining a sticking point for a Brexit agreement. Prime Minister Theresa May also faces opposition within her own cabinet and Parliament to her current plans for the future relationship with the bloc.

To contact the reporter on this story: John Ainger in London at jainger@bloomberg.net

To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net, Neil Chatterjee

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