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Pound dips from year high on weak pay growth

Pound falls from one-year high against the dollar as weak pay growth continues to trail inflation.

Pound dips from year high on weak pay growth

The pound has dipped from a one-year high against the dollar, as weak pay growth figures underlined the squeeze on household finances.

The pound gave up the day's gains against the dollar, falling to $1.328, having earlier in the session hit a one-year high of $1.333.

Wages in the three months to the end of June were 2.1% higher than a year earlier, below investors' expectations of a 2.3% rise, and well below the level of inflation, reported at 2.9% yesterday.

That news outshone a surprise fall in the unemployment rate to its lowest level since 1975.

Ed Monk at Fidelity International said the weak pay growth was likely to embolden doves at the Bank of England.

'Lagging wages make it more likely the Bank of England will look through rising inflation when it decides on interest rates this week,' he said.

'Prices are rising above target, which creates the case for raising rates, but today's wage data suggests all it still not right in the economy.'

Despite today's dip, the pound remains one of the best performing major global currencies over the last week, having risen 1.8% against the dollar over the last five days.

That has weighed on the FTSE 100, whose members rely on overseas markets for around three quarters of their earnings. Down 44 points, or 0.6%, at 7,357 today, it has fallen 1.1% over the last week, lagging other major stock markets.

Miners were among the biggest fallers on the FTSE 100 this morning, as profit-taking hit metals prices.

Anglo American (AAL) fell 1.9% to £13.68, Glencore (GLEN) was down 1.7% at 366.3p and BHP Billion (BLT) dropped 1.6% to £14.15.

1 comment so far. Why not have your say?

In the Dark

Sep 14, 2017 at 18:21

Wages are not going to increase until employers need the value that employee bring to their business which demands the increase. Currently government control of wages (minimum and living wages) are a constraint on wage growth since employees have no reason to move on wages and are quite happy with the status quo. Employers use wage control to good effect harmonising wages to the minimum wage and thereby reducing the incentive to move job.

Further constraint is applied through personal taxation. The cost/benefit of a job move is impeded by the higher tax level threshold set at a low income level.

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