Published: Tue, April 17, 2018
Economy | By Shawn Conner

The pound is at its highest level since the Brexit vote

The pound is at its highest level since the Brexit vote

Badly battered in the aftermath of Britain's 2016 vote to leave the European Union, the currency has staged a major comeback, and has climbed 6% against the dollar and 3% against the euro this year alone. Inflation seems set to fall back towards target, but a pick-up in wage growth points to an erosion of slack in the labour market.

Sterling's value has increased by more than 6% since the start of the year, and it is now "the darling of the currency world".

But despite stalling pay growth, the latest snapshot from the labour market comes after inflation dipped to 2.7% in February, reflecting the waning impact of the fall in the value of the pound straight after the European Union referendum.

The British Pound eased from post-Brexit highs this morning, after the release of wage data from the Office for National Statistics (ONS).

If the pound ends the day higher, it will have made gains against the dollar for seven consecutive trading days.

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In early trading on Tuesday, the pound reached $1.4377, surpassing a postreferendum high set in January.

But since the beginning of 2017 it has started to recover.

However, since the middle of last year, the pound has ripped higher, with the currency trading more than 15% above levels seen this time last year.

Average wages in Britain are rising faster than prices for the first time in about a year, official figures showed Tuesday, a development that will likely fuel expectations that the Bank of England will raise interest rates again next month.

Dollar weakness after uncertainty about United States trade policy has also been a contributory factor, traders said.

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With unemployment at its lowest level since the 1970s, employers have begun raising pay for staff more quickly, though by less than increases of about 4 percent a year before the financial crisis.

Viraj Patel, a currency strategist with Dutch bank ING, labeled sterling the "darling of the currency world", in an analysis released at the end of last week.

Wages in nominal terms (not adjusted for price inflation) increased by 2.8% in the three months to February 2018, both including and excluding bonuses, compared to a year earlier.

The ONS will publish March's inflation figures on Wednesday.

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