Pound rose after UK labor market data for the three months ending October revealed solid wage increases.

The pound sterling (GBP) rose substantially versus its main counterparts on Tuesday following the announcement of UK labor market data for the three months ending October.

The UK’s unemployment rate remained at 4.3%, as forecast, and 173K new workers added to the labor force.

The British pound strengthened as Average Earnings Excluding Bonuses, a key measure of wage growth, climb at a healthy rate of 5.2%, faster than Estimates of 5% are accelerating from the previous 4.9% increase.

Officials at the Bank of England (BoE) regularly monitor wage growth data when deciding on interest rates because it is a primary driver of inflationary pressures in the UK service sector.

Meanwhile, Average Earnings Including Bonuses increased by 5.2%, outpacing expectations of 4.6% and a previous figure of 4.4%.

Wage growth data has boosted the British pound, offsetting other components of the labour data release that were not as Pound-positive. For example, in the three months ending October, the economy added 173K new workers, down from the previous release of 253K, which had been revised upward from 219K. The ILO Unemployment Rate of 4.3% was consistent with previous releases and projections.

Higher wage growth indicates That UK service inflation could stay strong, with new inflation statistics due on Wednesday. The core Consumer Price Index (CPI), which excludes volatile goods, expected to have increased by 3.6%, exceeding the 3.3% increase in October.

Such an outcome would confirm market predictions that the BoE will keep interest rates unchanged at 4.75% in its monetary policy announcement on Thursday.

Daily market Update: Pound Sterling awaiting Fed-BoE policy meetings and UK inflation data.

In Tuesday’s London session, the pound sterling ticked higher, approaching the psychological resistance of 1.2700 against the US dollar. The GBPUSD pair surges higher as the USD wobbles, with the US Dollar Index (DXY) lingering near an almost three-week high around 107.00 ahead of the Fed The Federal Reserve (Fed) made its policy decision on Wednesday.

According to the CME FedWatch tool, traders are almost likely that the Fed will cut interest rates by 25 basis points (bps), to 4.25%-4.50%. As the Fed widely expected to lower its benchmark borrowing rates, markets will closely watch Chair Jerome Powell’s press conference remarks and the dot plot for new interest rate indications.

Investors predict the BoE to maintain interest rates, but the Fed expected to lower them this week.

According to the most recent Bloomberg survey, market participants expect the Fed to adjust its policy stance from “dovish” to “slightly hawkish” based on the belief that upside inflation risks have increased while downside employment risks have decreased.

The Flash US S&P Global PMI report for December revealed that employment moved higher in December, up for the first time. in five months, marking the second consecutive monthly growth in manufacturing jobs and the first increase in service sector employment since July.

During Tuesday’s session, investors will be focused on the monthly US Retail Sales data for November, which will be release at 13:30 GMT. Retail Sales data, a vital indication of consumer spending, expected to have climbed by 0.5%, faster than the previous release of 0.4%.