The pound approached its strongest level since 2007 against the euro before a report economists said will show U.K. wage growth is accelerating, adding to the case for the Bank of England to increase interest rates.
Sterling jumped on Tuesday as policy makers flagged the prospect of earlier-than-anticipated U.K. rate increases. In testimony to lawmakers, Governor Mark Carney said the time for the benchmark interest rate to rise from a record low is “moving closer,” while Monetary Policy Committee member David Miles said “the time to start normalization is soon.”
The U.K. currency appreciated against all but one of its 16 major peers on Wednesday and government bonds fell for a sixth day. Regular earnings rose an annualized 3.3 percent in the three months through May, compared with 2.7 percent in April, the Office for National Statistics will say at 9:30 a.m. London time, according to the median forecast of analysts in a Bloomberg survey. A separate report is forecast to show employment growth slowed in the same period.
The pound strengthened 0.1 percent to 70.33 pence per euro as of 8:38 a.m. London time. It touched 69.89 pence on June 29, the strongest since November 2007. Sterling added 0.1 percent to $1.5654, having climbed 1 percent on Tuesday.
Benchmark 10-year gilt yields rose two basis points, or 0.02 percentage point, to 2.14 percent. The 5 percent bond due in March 2025 fell 0.155, or 1.55 pounds per 1,000-pound face amount, to 124.82. The yield had climbed 29 basis points in the previous five days.
Investors don’t see rates rising until May 2016 at the earliest, according to forward contracts based on the sterling overnight index average, or Sonia.