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UK Real Earnings Shrink, British Pound Falls Back

UK Real Earnings Shrink, British Pound Falls Back

Martin Essex, MSTA, Analyst

Talking Points

- UK workers’ earnings after inflation contracted at the fastest rate since 2014 in the three months to April.

- GBPUSD fell back on the news, erasing earlier gains on hopes of a “soft” Brexit.

- Check out the DailyFX Economic Calendar and see what live coverage of key event risk impacting FX markets is scheduled for the week on the DailyFX Webinar Calendar.

UK workers’ earnings after inflation fell at their fastest rate since 2014 in the three months to April, implying a squeeze on incomes and therefore on consumption and ultimately on economic growth. Yesterday, the UK inflation rate was reported at 2.9%.

Excluding bonuses, weekly earnings grew by just 1.7%, well below expectations of a 2.0% increase. Moreover, the previous figure was revised down to 1.8% from a previously reported 2.1%. According to the UK’s Office for National Statistics, which compiles the data, wages after inflation in the February-April quarter were down 0.4% year/year including bonuses and down 0.6% excluding bonuses.

In response to the latest figures, the Pound dropped back, losing earlier gains in London trading on hopes of a softer Brexit after last week’s inconclusive UK election result.

UK Real Earnings Shrink, British Pound Falls Back

Chart by IG

The unemployment rate held steady in the quarter at 4.6%, in line with forecasts, and remained at its lowest for more than 40 years. Jobless claims in May rose by a smaller than expected 7,300 but the number of people in work rose by a lower than expected 109,000.

--- Written by Martin Essex, Analyst and Editor

To contact Martin, email him at martin.essex@ig.com

Follow Martin on Twitter @MartinSEssex

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