British Pound Sterling banknotes are seen at the Money Service Austria company's headquarters in Vienna, Austria, November 16, 2017. REUTERS/Leonhard Foeger
LONDON - 17 April 2018: Sterling on Tuesday soared to its highest level since Britain’s vote to leave the European Union in June 2016, boosted by expectations that strong earnings data will seal the deal for a Bank of England interest rate hike and broad dollar weakness.
The rally comes ahead of the crucial data on the labour market and average earnings, which is due at 0830 GMT.
With worries about a disorderly exit from the EU next year pushed into the background, and seasonal inflows from foreign companies sending dividend payments to British shareholders, investors have added to their pound positions.
The pound gained 0.2 percent to $1.4371, beating a previous post-Brexit-vote high set in January.
Workers’ total earnings are expected to rise by an annual 3 percent in the three months to February, according to a Reuters poll of economists.
The data is seen as crucial because the BoE has signalled that it needs to see rises in wage pressures before it starts to raise rates as it tries to curb inflation.
“A 3 percent wage growth print in today’s UK jobs report should seal the deal for a May BoE hike – but it may be the activity data that holds the key to the pace of BoE policy normalisation and sterling’s cyclical re-pricing,” ING’s currencies strategist Viraj Patel said.
Markets expect interest rates to be raised by 25 basis points next month.
Inflation figures due Wednesday have the potential to boost sterling further.
Against the euro, sterling traded flat at 86.35 pence per euro and close to 11-month highs.