Sterling rises as strong labour market data reinforces rate hike bets
TLT•Sterling rose 0.3% to $1.3343 against the dollar and 0.3% against the euro after UK jobs data reinforced expectations of a Bank of England rate hike. Money markets almost fully priced a quarter-point increase on November 5.
1. Jobs data lifts pound
The pound rose on Tuesday after UK data showed a rise in payrolled employees, a lower unemployment rate and faster-than-expected growth in average hourly earnings in the three months to August. Sterling was up 0.3% at $1.3343 against the dollar and 0.3% at 84.04 pence per euro.
2. Rate expectations
Money markets were almost fully pricing a quarter-point rate hike when the Bank of England announces policy on November 5, and were pricing four hikes by the middle of next year. Lloyds economist Nikesh Sawjani said the data reinforced expectations for a November hike but did not make a compelling case for a more aggressive path, citing a decline in vacancies. He said the outlook also hinged on Middle East developments, energy prices and whether higher costs lead to second-round effects in wages and prices.
