Tuesday 22 January 2019

Sterling rises after May wins key vote

Prime Minister Theresa May leaves Downing Street, London, after a Cabinet meeting. Stefan Rousseau/PA Wire
Prime Minister Theresa May leaves Downing Street, London, after a Cabinet meeting. Stefan Rousseau/PA Wire

Tom Finn and Timmy Wilkes

The pound rose yesterday after British Prime Minister Theresa May saw off a rebellion in parliament over amendments to a bill for the country's exit from the EU.

After falling to a five-day low in earlier trading, sterling strengthened 0.3pc against the dollar to $1.3424 after parliament voted to back the government on several amendments to the EU withdrawal bill. The currency also hit a two-day high versus the euro of 87.78 pence.

Mrs May had faced a showdown with lawmakers who wanted the power to force her government to go back to the negotiating table if they reject a Brexit deal, testing her plans for leaving the European Union.

A minister long critical of the government's handling of Brexit, Phillip Lee, resigned earlier in protest at what he called its "wish to limit" the role of lawmakers in the process.

But Mrs May won a key vote in parliament with a compromise on plans to give lawmakers a 'meaningful' vote later this year on the terms of Britain's exit from the EU.

Earlier yesterday markets shrugged off weaker-than- expected wage growth data, the latest sign of protracted weakness in the British economy.

Several companies have announced store closures and job cuts, and in addition poor industrial production output numbers published on Monday hit sterling. Those developments are likely to lower expectations of a Bank of England interest rate rise in August, given the central bank has said it wants to see more wage pressures before it increases borrowing costs.

Money markets currently price in a 44pc chance of a 25 basis point hike in August.

The employment data had indicated that the UK economy created jobs at a healthy pace in the three months through April.

However, wage growth unexpectedly slowed.

April is a significant month for wage settlements as it marks the start of the new financial year for both the government, which employs more than five million workers and sets the statutory minimum wage, and also for many private-sector firms.

Around 40pc of all pay awards take effect during the month. The employment rate reached a record-high 75.6pc after the economy added 146,000 jobs, more than the 120,000 predicted by economists.

The jobless rate held at 4.2pc, its lowest since 1975.

Surprise moderation in the pace of wage growth may suggest the economy retains a margin of spare capacity, however.

"It's a really strong set of employment figures," Andrew Wishart, an economist at Capital Economics, said.

"It looks like that's set to continue."


Irish Independent

Also in Business