* Graphic: sterling and gilt yields bit.ly/2dgAXn1
* Graphic: World FX rates in 2016 tmsnrt.rs/2egbfVh
By Jemima Kelly
LONDON, Dec 14 Sterling steadied on Wednesday
after data showed the number of people in work in Britain
falling but wages growing, as investors focused on a Federal
Reserve meeting later in the day that is set to produce the
first interest rate rise in a year.
The Office for National Statistics numbers suggested a
slowing in the labour market after the Brexit vote, with the
number of people in work falling by 6,000 in the three months to
October - the first decline since the second quarter of last
Though Britain's unemployment rate stayed at 4.8 percent, in
line with forecasts, that is widely expected to rise next year
as companies hold off from hiring as they wait for more clarity
on the country's future ties to the EU, which could take years
to be negotiated.
Total earnings including bonuses rose by an annual 2.5
percent, compared with 2.4 percent in the three months to
September. Excluding bonuses, earnings rose by the most since
the three months to August 2015.
Sterling initially inched higher after the data but then
eased back to trade flat on the day at $1.2657 by 1000
GMT. Against the euro, it was flat at 83.95 pence.
"I take (today's data) as another reason to think that the
UK economy is going to run out of steam over the course of 2017,
so my bias is to go short cable (sterling/dollar)," said Societe
Generale macro strategist Kit Juckes. "I'm not going to get
super-excited about data showing ex-bonus wage growth."
"I still like being short of the pound here. I still think
the balance of risks is that we get negative news as 2017
The Fed is seen as all but certain to raise its main rate by
a quarter point to 0.50-0.75 percent, in an announcement due at
1900 GMT. But it will be Chair Janet Yellen's tone, and new
forecasts for future rates, that will drive the market response.
In contrast, the Bank of England is expected to keep rates
at record lows at a policy meeting concluding on Thursday.
Market pricing shows investors expect rates to stay unchanged
until the end of 2018 because of uncertainty over the Brexit
process, despite higher inflation fed by sterling's 10 percent
trade-weighted fall since the EU referendum in June.
Data on Tuesday showed consumer prices rose 1.2 percent last
month, beating economists' expectation for a 1.1 percent annual
rise in a Reuters poll.
"The pronounced fears amongst market participants over
pound-induced inflation in the immediate aftermath of Brexit
have receded notably," said MUFG's European head of G10 currency
strategy, Derek Halpenny.
"The inflation data yesterday told two stories, but the key
one for us reinforces the easing of concerns over a damaging
inflation-induced hit to the economy in 2017."
(Editing by Alison Williams)