Pound Erases Drop as Data Provides Respite From `Brexit' Woesby
Sterling rebounds from two-week low versus U.S. dollar
U.K. wage growth excluding bonus unnexpectedly rises
The pound erased a decline against the euro as U.K. wage data that was better than economists forecast provided respite for investors concerned about a possible British exit from the European Union.
Sterling rebounded from a two-week low against the dollar after data showed pay excluding bonuses rose 2 percent in the three months through December from a year earlier compared with 1.9 percent in the quarter through November. The median forecast in a Bloomberg survey of economists was for a reading of 1.8 percent. BOE officials have highlighted that wage growth is key to reaching their target of 2 percent inflation. Unemployment held at a decade-year low of 5.1 percent in the fourth quarter.
Even so, gains in the U.K. currency were subdued as Prime Minister David Cameron prepares for negotiations on the terms of Britain’s membership of the EU. The outcome of the talks in Brussels this week is set to determine the timing of the government’s referendum on whether to remain in the trading bloc.
“These data were sufficient to suggest to the market that there’s a lot of bad news priced in to the pound,” said Jane Foley, a senior currency strategist at Rabobank International in London. “It’s ripe for some profit-taking because the selloff in sterling is quite extended. That said, in the weeks ahead politics is the main item.”
The pound was little changed at 77.89 pence per euro as of 11:14 a.m. London time, after earlier weakening as much as 0.7 percent. Sterling was at $1.4295, after earlier falling to $1.4245, the least since Feb. 1.
U.K. 10-year government bonds fell for a fourth day, with the yield rising one basis point, or 0.01 percentage point, to 1.45 percent. The 2 percent gilt due in September 2025 declined 0.12, or 1.20 pounds per 1,000-pound face amount, to 104.86.
The U.K. sold 2.75 billion pounds of gilts due in 2026 at yield of 1.59 percent at an auction Wednesday. That’s the lowest yield on record for a sale of 10-year gilts.