The pound hit its highest level against the dollar since the Brexit vote in June 2016, rising to $1.4364 by mid-morning, but fell back after the Office for National Statistics confirmed wage growth had outstripped inflation in the three months to February.
Sterling’s surge, which pulled the FTSE 100 down three points at the open has been attributed to optimism ahead of wages and unemployment data, released on Tuesday morning, weakness in the dollar, and reduced concerns around the possibility of a hard Brexit as the UK and EU get ready for the next round of negotiations.
Traders pushed the pound up in anticipation of Tuesday’s data, with expectations that the numbers would lend support to a spring rate rise by the Bank of England.
The figures from the Office for National Statistics showed wages were up 2.8 per cent in the three months to February, compared to the same time last year, which was higher than the rate of inflation in the same period.
However, traders were expecting earnings growth to hit 3 per cent, and sterling pared its gains following the release of the data, falling back to $1.434, and dropping 0.09 per cent against the euro to €1.1572.
Connor Campbell, financial analyst at Spreadex, said that while the pound “saw its momentum stall... a disappointing wage growth reading wasn’t enough to properly knock the currency from its recent peak”.
“Though clearly a tad disappointed by the fact the wage growth reading missed expectations, falling 0.2 per cent against the dollar and 0.1 per cent against the euro, this still leaves sterling at two and a half and 11 month highs against the greenback and the single currency respectively,” he added