Published: Sat, July 20, 2019
Markets | By Otis Pena

British wage growth hits highest point since 2008: ONS

British wage growth hits highest point since 2008: ONS

Sales jumped by 3.8% year-on-year in June and by 1% on a month previous, well above the 2.6% and -0.3% priced in.

Fresh trade worries and uncertainty about the Federal Reserve's plans for cutting interest rates weighed on Asian markets Wednesday while fears of a hard Brexit kept the pound wallowing at more than two-year lows.

Vacancies fell to their lowest level in more than a year of 827,000 across the United Kingdom - 9,000 fewer than a year earlier and 19,000 fewer than the previous quarter.

By 0720 GMT, the pound was down 0.15% at $1.2386 GBP=D3 . But even they are certain the currency is set for a volatile ride from here.

Rising concerns about a no-deal Brexit hit the pound once more on Wednesday, while stock markets retreated amid renewed trade war worries and uncertainty over the outlook for U.S. interest rates. But the growth in employment slowed to 28,000, the weakest increase since the three months to August last year and vacancies fell to their lowest level in more than a year.

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Ryanair and the ferry operator Irish Continental have already warned of the impact of Brexit, and even though a weaker pound would push inflation here lower in the short term, there is a risk that the negative supply shock could cause prices to push higher, eroding wage gains in Ireland.

Three-month implied sterling-dollar volatility touched 8.75% Thursday, the highest since April. If the figure shows weakness in the confidence of the economy, we can expect to see some sell off pressure in sterling as capital flows towards liquidity bearing assets like United States dollars, weighing down on GBP's current rally. Again, this is a story of Sterling weakness rather than Turkish Lira strength, but with criticism of Turkey's decision to buy a Russian missile system growing and the country risking its position in North Atlantic Treaty Organisation as a result, the Lira could yet find difficulty in sustaining these gains. The big question is how long can that last. GBP/CAD has been falling nearly solidly since May, and while last week's movement was mixed, this week has already seen GBP/CAD plunge from its opening levels of 1.6384 to briefly touch on a fresh 2019 low of 1.6163.

Another technical indicator known as the RSI that measures whether currencies are oversold or overbought, also implies the recent drop in the pound is not that extreme.

BNY Mellon strategists note the pound has only traded less than 3 percent of the time below the 90 pence per euro level since the single currency came into existence in January 1999.

"Clearly the issues facing the United Kingdom now have not been faced in the last decade or so, even during the global financial crisis, and the potential for the pound to hit the 2016 lows is there", said Neil Mellor, a senior currency strategist at BNY Mellon in London.

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