Investing.com - The pound touched the day’s highs against the broadly weaker dollar on Wednesday after data showing that the UK unemployment rate hit a 42-year low in the three months to March, but wages shrank.
GBP/USD was up 0.16% to 1.2938 by 09.06 GMT from around 1.2931 ahead of the report.
The unemployment rate in the UK unexpectedly ticked down to 4.6% in the period from January to March, the Office for National Statistics said, which was its lowest in almost 42 years. Economists had expected it to remain unchanged at 4.7%.
The report also showed that wage growth fell behind inflation for the first time in two-and-a-half years, underlining concerns over a financial squeeze on consumers.
Excluding bonuses, earnings rose by 2.1% year-on-year, the slowest increase since July 2016 and below forecasts for a 2.2% increase.
Including bonuses, wages rose by 2.4% year-over-year in the three months to March, compared to February’s gain of 2.3%.
That means wages are not keeping pace with inflation, which was 2.3% in February and March before accelerating to 2.7% in April.
“The recent increase in consumer price inflation including owner occupiers’ housing costs has seen the annual rate of real wage growth (excluding bonuses) turn negative for the first time since the three months to September 2014,” the ONS said.
The claimant count increased by a seasonally adjusted 19,400 in April, compared to expectations for a gain of 7,500 people, following an increase of 33,500 a month earlier.
The dollar remained on the defensive on Wednesday as mounting political turmoil in the U.S. along with weak economic data weighed.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.14% at 97.96 after ending the previous session down 0.81%.
The dollar came under renewed selling pressure following news that U.S. President Donald Trump asked now sacked FBI Director James Comey in February to halt an investigation into former National Security Adviser Michael Flynn’s ties with Russia.
The report came amid turmoil in the White House after Trump fired Comey and then shared sensitive intelligence obtained from a close U.S. ally with Russia's foreign minister about an Islamic State operation.
The news raised concerns over whether Trump interfered with the judicial process and added to investor’s doubts that his administration will be able to get a divided U.S. Congress to push through his economic stimulus program.
Meanwhile, weak U.S. housing data on Tuesday added to a recent run of disappointing economic data and underlined uncertainty over the monetary policy outlook.
Sterling was steady against the euro, with EUR/GBP at 0.8577.
In the euro zone, data on Wednesday confirmed that the annual rate of inflation was 1.9% in April, up from 1.5% in March.