ENM: Sterling hits one-month low against euro after UK jobs data
LONDON: Sterling hit a one-month low against the euro on Wednesday after data showing weak earnings growth and a rise in Britain's unemployment rate added to concerns about the fragile economic outlook.
Bank of England minutes released at the same time showed policymakers voted 6-3 in favour of keeping asset purchases on hold at 375 billion pounds in April, as expected, but investors were more focused on signs of weakness in the labour market.
Economists say it remains a close call whether first quarter growth data next week will show the British economy sliding back into recession, and the uncertainty has weighed on demand for the pound.
The euro rose to 86.37 pence against the pound, its highest level since March 15, before paring gains to last trade up 0.4 percent on the day at 86.16 pence. Traders said stop loss orders were triggered around 85.00/05 pence.
Sterling fell 0.6 per cent versus the dollar to $1.5262, pulling further away from last week's two-month high of $1.5412, with Middle East investors cited as sellers.
"It's the earnings data that has done the damage. Combined with CPI data yesterday it shows the brutal squeeze on real incomes is ongoing," said Adam Cole, global head of FX strategy at RBC Capital Markets.
British pay excluding bonuses posted the smallest increase on record in February, failing to keep pace with annual consumer price inflation of 2.8 per cent.
Investors will next focus on retail sales data on Thursday to help gauge domestic demand in an economy teetering on the brink of its third recession in less than five years.
A Reuters poll found that while the economy will narrowly skirt recession when the GDP data is released next week, growth is likely to be tepid.
BOE MINUTES
The BoE remained split on whether to restart its asset purchase programme to boost Britain's economy.
Some analysts said there was a growing perception in the market that BoE asset purchases would now be on hold until new governor Mark Carney takes the helm in July.
Monetary easing involves pumping cash into the economy through bond-buying and tends to weigh on a currency by increasing its supply.
Raghav Subbarao, FX strategist at Barclays, said the fact policymakers seemed less concerned about the sterling exchange rate in this month's meeting had also spurred some selling.
"They had a slightly more concerned tone about the weakness of the exchange rate in the March minutes that has disappeared in April. That's modestly bearish for sterling," said Subbarao.
