GBP Rises to 7 Year High Versus EUR

The pound rose to a seven-year high versus the euro as U.K. wage growth accelerated and the unemployment rate fell. The data support the Bank of England’s decision to not ease monetary policy amid low inflation.Sterling climbed against all of its 16 major peers. Ten-year government bonds fell, pushing up the yield to its highest level of 2015, as the central bank said it sees inflation rising “fairly sharply” next year, when effects of weaker oil prices may fade. Pay grew an annual 2.1 percent in the fourth quarter, outstripping inflation by the biggest margin since 2008. The jobless rate fell to the lowest in more than six years, the Office for National Statistics said.
“The wage growth breaking above 2 percent is probably the key catalyst” for the pound’s gains, said Stuart Bennett, head of Group of 10 currency strategy at Banco Santander SA in London. “Over the past three months of data we believe sterling has been undervalued in relation to where unemployment is going. The fact these numbers are a surprise may have been a wake-up call.”
The pound appreciated 0.8 percent to 73.73 pence per euro at noon London time, and touched 73.634 pence, the strongest since January 2008. Sterling rallied 0.4 percent to $1.5422, for the first increase in three days.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza