Sterling weakened after UK employment data released on Wednesday. Despite the official unemployment rate falling to its lowest level since late 2008 in the three months to May, the focus was on wages.The jobless rate fell to 6.5% from 6.6 % a month earlier but wage increases missed estimates and came in weaker-than-expected, remaining near 2009 lows, giving evidence that wages lagged inflation.In the three months through May, total wages (including bonuses) rose a yearly 0.3%, below forecasts of 0.5%, and down from a yearly rise of 0.8% in the three months to April.The immediate reaction to the data was negative, and the pound was sold off, pushing it down to a low of 1.7111, down from a pre-data high of 1.7150.On Tuesday the pound hit a near 6-year high of 1.7190 after surprisingly strong UK inflation numbers for June. CPI rose to 1.9%, getting closer to the Bank of England’s 2% target.Markets are expecting the BoE to raise interest rates later this year, being the first major central bank to do so, and in sharp contrast to the European Central Bank which may even ease policy further. Meanwhile the Federal Reserve is not seen raining rates until at least mid-2015.The falling unemployment rate in the UK is a sign that the recovery is steady and the growth in the economy may make it difficult for the BoE to keep rates at a record low 0.5%.
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