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Pound Drops As U.K. Wage Growth Rose Less-than-expected

The British pound weakened against the other major currencies in the early European session on Wednesday, after data showed that the U.K. wage growth rose less than expected in December.

Data from the Office for National Statistics showed that U.K. average earnings, both including bonus, rose 2.6 percent year-on-year in the December quarter after 2.8 percent gain in the previous three months. Economists had forecast 2.8 percent increase. Excluding bonus too, wage growth eased to 2.6 percent from 2.7 percent.

The number of unemployed fell by 7,000 in the fourth quarter of 2016 to 1.6 million. The ILO jobless rate for the quarter was 4.8 percent, unchanged from the previous three months, in line with economists' expectations.

The number of those seeking jobless benefits, known as claimant count, dropped by 42,400 month-on-month to 745,000 persons in January, while economists had forecast an increase of 500 persons. The year-on-year increase in the figure was 2,800 persons.

The claimant count rate fell to 2.1 percent in January from 2.3 percent in December. The rate was the lowest since February 2016, when it was at the same level. Economists had forecast the rate to remain unchanged in January.

The number of people in work grew by 37,000 persons from the previous month to 31.83 million. The employment rate was 74.6 percent, the highest since records began in 1971.

Meanwhile, the European stock markets traded higher, with banks leading the surge on expectations that they will benefit from the era of higher interest rates.

In the Asian session today, the pound held steady against its major rivals.

In the European session, the pound fell to an 8-day low of 1.2420 against the U.S. dollar, from an early high of 1.2475. The pound may test support near the 1.22 region.

The pound dropped to 142.16 against the yen, from an early near 2-week high of 142.77. On the downside, 140.00 is seen as the next support level for the pound.

Against the euro and the Swiss franc, the pound edged down to 0.8493 and 1.2532 from early highs of 0.8466 and 1.2573, respectively. If the pound extends its downtrend, it is likely to find support around 0.87 against the euro and 1.21 against the franc.

Looking ahead, Canada manufacturing sales data for December and existing home sales data for January, U.S. CPI data for January, retail sales data for January, industrial production for January, business inventories for December, crude oil inventories data, U.S. Empire State manufacturing index for February, and U.S. NAHB housing market index for February are slated for release in the New York session.

At 10:00 am ET, Federal Reserve Chair Janet Yellen will testify on the Semiannual Monetary Policy Report before the House Financial Services Committee, in Washington DC.

At 12:00 pm ET, Boston Fed President Eric Rosengren is expected to speak before a New York Association for Business Economics luncheon, in New York.

At 12:45 pm ET, Federal Reserve Bank of Philadelphia President Patrick Harker is expected to speak about the economic outlook at La Salle University, in Philadelphia.

by RTTNews Staff Writer

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