British pound touches one-week lows as slow wage growth curbs optimism

British Pound

The British pound reached one-week lows against the dollar on Wednesday after U.S. consumer prices had their biggest surge in nearly four years and retail numbers exceed expectations.

According to the United States Labor Department, the Consumer Price Index went up 0.6 percent in the previous month after gaining 0.3 percent in December while the Commerce Department reported a 0.4 percent rise in January retail sales.

UK labor data that was released early in the session had already knocked the sterling back, showing a slowing of wage growth in the fourth quarter that was bad news for British consumers facing a surge in inflation in the months ahead.

The pound has recovered slightly after falling as low as $1.2386 to trade at about 0.1 percent lower on the day at $1.2451 and 84.93 pence per euro.

CMC Markets chief analyst Michael Hewson said “This is more a dollar strength story, though sterling is a little weaker after the UK data.”

The UK jobs report, below a consensus forecast of 2.8 percent revealed a 2.6 percent rise in average weekly earnings year-on-year in the fourth quarter of 2016.

Unemployment went down and the number of people in work went up by 37,000 but the slowdown in wage growth fueled concerns about how much consumers will support economic growth as talks on leaving the EU commences this year.

"The jobs data continues to reflect the generally positive tone we saw through the second half of last year in the UK but we still think there are some risks on the horizon for the currency relating to triggering Article 50 (formalizing Brexit)," said TD Securities senior global strategist James Rossiter.

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