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Strong wage growth provides lift for Sterling

13/11/2018

Cable (GBPUSD) rallied today after the September labour market report showed encouraging wage growth, and largely ignored the slight rise in unemployment. This suggests that wage increases are simply functioning by the well-established rules of Supply & Demand rather than as a reflection of productivity. Whilst this is not expected to have any immediate impact on the MPC of the Bank of England, it will be taken into account during their next deliberations. The slightly more pressing problem for Sterling remains Brexit, and the uncertainty around the determination with which Mrs May seems determined to stick to her “worst of all worlds” Chequers plan. If her Government colleagues can persuade her that her plan is moribund, then Sterling should benefit.

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