The pound rallied against the dollar on Tuesday after data showed UK wage growth came in above expectations, adding to arguments for further Bank of England interest rate hikes.
The headline: "UK wage growth lifts pound to 15-month high versus dollar" captures the key developments in the news.
According to the article, British wages excluding bonuses rose 7.3% in the three months to May compared to a year earlier, exceeding economists' forecasts of a 7.1% increase.
The above-expected wage growth figure suggested inflationary pressures remained strong in the UK economy, bolstering the case for the Bank of England to continue raising interest rates sharply.
In reaction to the data, the pound rose 0.3% against the dollar to $1.2899 - its highest level against the U.S. currency since April 2021. The pound also gained marginally versus the euro, with the euro falling 0.1% to buy 85.43 pence.
The pound's gains on Tuesday were driven by the wage growth numbers intensifying bets that the Bank of England will need to hike rates aggressively going forward to address inflation. Stronger UK wages potentially give the central bank more confidence that tightening will not damage the jobs market severely.
Higher UK interest rates tend to support the pound's value by making British assets more attractive to yield-seeking international investors. This dynamic appears to have again played out following the upbeat wage data.
