By Luke Dyson
For the week to date sterling has gained some serious traction across the board. This was following a better than expected labour market release, which now suggests UK wages are close to peaking.
It was announced wage figures were above expectation, however a raise in unemployment rates but also an increase in claimant counts were also announced. This has heavily impacted sterling’s strength moving forward as the labour market begins to ease, with the likelihood that the Bank of England won’t have to follow up on an economy-damaging interest rate hike in the coming months.
The Bank of England is paying particular interest to labour and wage data when it comes to future interest rate hikes as these are key indicators of domestic inflationary pressures.
The most recent data for the average earnings index including bonuses rose 6.9% slightly higher than the expected 6.8% which shows UK wages are coming in at a high level and being consistent with domestic inflation.
We have seen sterling make some solid gains against the euro, with the GBP/EUR market now just below a 12 month high; making this an excellent buying opportunity if you have any up and coming currency requirements.
It has been stated by Goldman Sachs analysts that the real driving factor behind sterling’s recent gains against the euro is that investors are responding well to the Bank of England’s new approach to fighting inflation having seen recent labour market figures and having now rebuilt creditability amongst investors.
To date sterling still remains the best performing currency in 2023 in comparison with the other G10 currencies.
Sterling against the dollar we have seen a significant jump in the current rates with the markets now trading at the highest point in 2023 but also creating a new high from march 2022!
Again this was started off the bank of the labour market data being better than expected.
Wages in the Uk remain heavily under pressure still and this is likely to stimulate inflation further, however all the other labour data showed that the jobs market was cooling. This wont be long before wage pressures come down and core inflation begins pressuring again.
However with the market performing increasingly well please take advantage of the current rates, compared to a few weeks ago you are significantly better off when looking to buy euros or dollars. Thousands of pounds in savings on a typical property purchase!
Please get in touch with your currency consultant today to discuss making the most of this current opportunity.