Investing.com - The pound rose to session highs against the dollar and the euro on Wednesday after data showing that wage growth accelerated in August bolstered expectations for higher U.K. interest rates.
The Office for National Statistics said that the claimant count rose by a seasonally adjusted 1,200 last month, compared to expectations for a decline of 5,000.
July’s figure was revised to a decline of 6,800 people from a previously reported fall of 4,900.
Average earnings, including bonuses rose by 2.9% in the three months to July from a year earlier after a 2.6% increase in July, ahead of forecasts of 2.5%.
Excluding bonuses, average earnings also increased by 2.9%, in line with forecasts. It was the strongest rate of growth since 2009.
The report also showed that the rate of unemployment ticked down to 5.6% in the three months to July, better than forecasts for 5.6%.
GBP/USD rose 0.37% to 1.5401 from around 1.5345 ahead of the jobs report, while EUR/GBP fell to 0.7306 from 0.7341 earlier.
The pick-up in wage growth raised the chances that the Bank of England will hike rates sooner.
The report came one day after data showing that the annual rate of inflation in the U.K. fell back to zero in August, pressured lower by lower prices for energy and food.
Meanwhile, the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was little changed at 95.78.
The dollar continued to trade in recent ranges as investors awaited the outcome of the Federal Reserve’s two-day policy setting meeting which was beginning later in the day.
Investors remained on edge amid uncertainty over whether the Fed would hike short term interest rates for the first time in almost a decade on Thursday.
An increase in interest rates would boost the greenback by making it more attractive to yield-seeking investors.
The U.S. was to release data on consumer inflation later Wednesday.
Recent U.S. data has indicated that inflation is still weak, due to low oil prices and the stronger dollar, even as the labor market staged a strong recovery and the economy posted five consecutive quarters of growth.
Fed Chair Janet Yellen has said that an interest rate increase is data dependent but has also indicated that she expects to begin raising rates before the end of the year.