GBP/CAD steadies as UK wage growth slows but remains strong

The GBP/CAD currency pair steadied after earlier touching an intraday low of 1.7134 on Tuesday, as data showed UK core wage growth had been the slowest since the three months to September 2022, but still strong by historical standards. The data prompted investors to pare their bets on Bank of England rate cuts this year.

Average weekly earnings, including bonuses, rose 5.6% year-on-year to GBP 677 per week in the three months to February. Still, wages rose at a stronger-than-expected pace.

Regular pay, excluding bonuses, rose 6% year-on-year to GBP 633 per week in the three months to February, following a 6.1% surge in the prior period.

Wage growth is closely watched by the Bank of England, as the latter seeks to determine how much inflation pressure remains in the economy and if it can begin considering interest rate cuts.

UK’s adjusted experimental unemployment rate was reported at 4.2% in the three months leading up to February, up from 4% in the three months to January.

“The labour market continues to gradually cool but continued high wage growth underlines concerns over inflation persistence,” Jack Kennedy, senior economist at jobs platform Indeed, was quoted as saying by Reuters.

“With stubborn US inflation having dimmed hopes of an imminent Fed rate cut, prospects for UK rate cuts being cut before autumn also look questionable.”

Meanwhile, CAD traders are now expecting the March report on Canadian CPI inflation due out at 12:30 GMT.

In February, the annual inflation in the country decelerated to 2.8% to mark the lowest rate since June 2023.

Last week, the Bank of Canada left its target for the overnight rate intact at 5% and pledged to keep reducing its balance sheet, as policy makers again underscored upside risks to inflation.

The central bank said it expected inflation to stay close to the 3% level in the first half of 2024 before easing to the 2% target in 2025.

Currency Pair Performance

As of 8:25 GMT on Tuesday the GBP/CAD currency pair was inching up 0.04% to trade at 1.7162.