It was a quiet start to the week for sterling, with little movement ahead of the first of the big data releases this morning.
However, a surprising result for employment and earnings just released by the Office for National Statistics (ONS) is likely to reduce the need for interest rate cuts and has already boosted sterling. Unemplyment fell to 4.2%, from 4.4%, when it was expected to rise to 4.5%, with almost 100,000 new jobs added. An ONS spokesperson told Radio 4, however, that the figures were more nuanced than that, and that the overall picture was more subdued. Average earnings have risen by 5.4% in the past year, when a fall to 4.6% had ben expected.
The facts seem to be in sharp contrast to a report yesterday from the Chartered Institute of Personnel and Development, which found that pay rise expectations this year are around 3%, down from 4% just a couple of months ago. Also reported yesterday, the pay of the CEOs of FTSE100 companies rose to an average £4.19m.
The big stories yesterday were rising oil prices in reaction to increasing tensions between Iran and Israel. The US is sending more naval forces to the region. In another warzone the Russian rouble weakened to a three-month low following the attack into Russia by Ukrainian forces, which also threatens gas supllies.
Among central bankers, the hawks have been out, with Catherine Mann from the Bank of England saying that the recent economic volatility may have been due to interest rates being too low. Her opinions on sticky inflation fuelled by pay rises will have been borne out by this morning’s even tighter employment data. In the USA, monetary policymaker Michelle Bowman pointed out that “inflation is still uncomfortably above the FOMC’s 2% goal,” saying that she is “not confident that inflation will decline in the same way as in the second half of last year.”
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