Sterling on the back foot ahead of labour market data

Wads of British Pound Sterling banknotes are stacked in piles at the GSA Austria (Money Service Austria) company’s headquarters in Vienna July 22, 2013. — Reuters pic
Wads of British Pound Sterling banknotes are stacked in piles at the GSA Austria (Money Service Austria) company’s headquarters in Vienna July 22, 2013. — Reuters pic

LONDON, June 11 — Sterling hit a new five-month low against the euro and struggled versus the dollar today, as rival candidates for the role of British prime minister laid out their plans and investors prepared for labour market data.

The pound had been stuck in a tight trading range while edging lower in recent weeks as investors sit on the sidelines during the leadership contest to succeed Theresa May as leader of the Conservative party and country.

Yesterday’s worse than expected data, which showed the British economy shrank 0.4 per cent in April, added to the pound’s worries, and at 0830 GMT employment and wage growth data will be released.

A Reuters poll of economists expect wage growth in the three months to April to come in at three per cent year-on-year, down from 3.2 per cent in March. Wage growth is outstripping inflation and the Bank of England has said it will need to raise interest rates — probably faster than the market expects — to keep price growth close to its two per cent target.

Still, investors have mostly ignored economic data releases in Britain recently, believing the BoE is unlikely to act until Britain decides how, when and even if it leaves the European Union. The United Kingdom is scheduled to exit the bloc on October 31.

The pound dropped to as low as 89.325 pence per euro in early trade, a five-month low, before rebounding to 89.155 pence.

Against the dollar, sterling rose 0.1 per cent to US$1.2695, away from lows hit in late May but still firmly within its recent range. — Reuters