The value of sterling rose against its peer currencies as the latest data from the Office for National Statistics (ONS) showed wage growth of 3.1 per cent for the three months to the end of August.
This is the highest level of wage growth since January 2009, up from 2.9 per cent in the previous quarter.
Inflation for the period was 2.5 per cent, so real wage growth, that is, wage growth after inflation was 0.6 per cent.
Sterling rose above £1.32 to the dollar in the immediate aftermath of the announcement as investors believe higher wage growth will lead to higher inflation and cause the Bank of England to raise interest rates.
The rise in wages was expected by the Bank, with its chief economist Andy Haldane saying last week he expected wages to rise persistently above inflation.
Joshua Mahony, market strategist at IG Group, said the rise in the value of sterling was a reflection the market was focusing on actual economic data rather than political speculation.
Edward Park, investment director at Brooks Macdonald, said: “Based on the current state of negotiations our base case is we see a deal agreed before the end of March and we assign around a 75 per cent probability to that.
“Should that occur we expect to see sterling trade around 5/10 per cent higher but not reach its pre-Brexit level as regardless of the deal the new arrangement is very likely to have more frictions to trade than the status quo.”
Meanwhile the accompanying unemployment number was unchanged at 4 per cent.
The Bank of England define full employment in the economy as being at 4.5 per cent, a number they revised downwards in recent years to reflect the insecure and temporary nature of some jobs.
Source: FT Adviser