* Graphic: Sterling and gilt yields bit.ly/2dgAXn1
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv
By Yumna Mohamed
LONDON, Feb 15 Sterling dropped to a one-week
low of $1.2428 on Wednesday after data showed UK wage growth
slowing in the fourth quarter, bad news for consumers facing a
potential surge in inflation in the months ahead.
The pound, generally steady over the course of a month when
the government debated the launch of formal talks on leaving the
European Union, fell a third of a percent against the dollar
after the report.
It showed a 2.6 percent rise in average weekly earnings
year-on-year in the fourth quarter of 2016, below a consensus
forecast of 2.8 percent. Unemployment fell and the number of
people in work rose by 37,000.
"The jobs data continues to reflect the generally positive
tone we saw through the second half of last year in the UK but
we still think there are some risks on the horizon for the
currency relating to triggering Article 50 (formalising
Brexit)," TD Securities senior global strategist James Rossiter
Softer UK inflation data on Tuesday knocked sterling off its
highest level in a month to the euro, suggesting to analysts
that the Bank of England will not be looking to hike rates any
The BoE cut rates to stave off any adverse impact of
Britain's vote to exit the European Union last June but the
resilience of the UK economy since has fuelled speculation that
it will tighten monetary policy sooner rather than later.
Inflation data on Tuesday showed the fastest rise in
consumer prices since June 2014, but the headline reading of 1.8
percent year-on-year was below economist forecasts of a 1.9
percent rise, dampening expectations of a rate hike in the UK.
CMC Markets chief analyst Michael Hewson put more emphasis
on a 20 percent jump in the cost of materials and fuel for
companies spurred by rises in world oil prices and the almost
one fifth fall in the value of sterling over the past year.
"People are looking at the CPI number and saying inflation
is nowhere near as strong as it should be, but that's not to say
it won't hit the Bank of England (BoE)'s 2 percent (target) in
the next couple of months," he said.
While rises in inflation will support expectations of a rise
in the interest rate investors get for holding sterling, the
concern is it will weaken British consumers spending if not
matched by rises in wages in the months ahead.
"The question remains when the strong rise in input prices
will finally be reflected in consumer prices as well,"
Commerzbank analyst Tathagata Ghose said in a note.
Sterling held near one-month lows against the euro at 84.68
(Editing by Jeremy Gaunt)