Sterling surged higher across the currency board yesterday morning thanks to some better-than-anticipated UK labour market data.

The headline unemployment rate held firm at a six-and-a-half-year low of 5.5% in the three months to April, as expected, but markets were more excited by a surprise jump in British wages from an upwardly revised 2.3% to 2.7%. Including bonuses it was the highest period of wage growth since the summer of 2011 and excluding bonuses it was the steepest incline since the beginning of 2009. Demand for the Pound soared as markets began to speculate that the ongoing rise in UK purchasing power – due to wage growth 2.6% higher than inflation – could persuade the Bank of England to consider cutting interest rates before the end of the year.

The Pound was also supported by the Bank of England’s latest minutes report, which showed that two policymakers were already close to voting for a rate hike in June, before yesterday’s robust wage growth data was released.

Euro

The Pound to Euro exchange rate rose by around 75 pips to its highest level since June 1st yesterday as investors piled into UK Gilts in hope of an earlier-than-anticipated rise in British interest rates.

The surprisingly positive UK wage report, combined with sanguine British ecostats of late, led to a large influx of BoE rate hike bets and this propelled Sterling higher versus the embattled Euro.

Over in Europe, it was announced that inflation rose by 0.3% in May but the sturdy CPI report was largely overshadowed by the threat of Greece leaving the 19-nation bloc.

There was actually a slight improvement in Greek negotiations, with Athens admitting that it was willing to consider new economic reforms to strike a deal as long as the new plan was ‘sustainable and addressed debt, financing and investment issues’. Greek official Euclid Tsakalotos also mentioned that further cuts to pension payouts were out of the question. At the moment there is little to suggest that a deal is close to being agreed but, considering past debt talks, it would be foolish to completely write-off the possibility of a deal at the eleventh hour.

US Dollar

The Pound to US Dollar exchange rate struck its highest level for seven months yesterday as BoE rate hike bets accelerated following the upbeat British labour market report. GBP/USD initially surged by over 100 pips when the report was released as some traders started to price-in the prospect of tighter policy in Britain at around the same time as in the United States.

‘Cable’ continued to rally during the evening, registering a further 100-pips of gains, following the Federal Reserve’s latest policy announcement. The Fed kept rates on hold at 0.25%, as expected, but analysts deemed the accompanying statement to mean that the first hike will likely take place in December rather than September. Fed Chairwoman Janet Yellen said that rates would not rise until the domestic economy is strong enough to support tighter policy, but she intimated that this was likely to happen before the end of the year.

Yellen also mentioned that a bad outcome from the Greek debt negotiations could weigh over the global economy and loosely suggested that a potential ‘Grexit’ could push back the Fed’s hiking outlook.

Canadian Dollar

Sterling rallied by around a cent-and-a-half against the Canadian Dollar to strike a near-four-month high yesterday. The Pound gained a lot of ground versus the majors yesterday morning because the robust wage growth report was considerably higher than markets had anticipated and because it showed that wages have been growing at a steady rate north of 2.0% for at least the last two months.

Australian Dollar

The Pound to Australian Dollar exchange rate rose to a fresh 71-month high yesterday as decent British wage numbers led to a sharp three-cent appreciation for the world’s oldest currency.

The risk-sensitive ‘Aussie’ managed to claw back some ground following the Fed’s monetary policy statement, as some traders pushed back their US rate hike projections, but Sterling pushed on during the Asian session to remain close to its highest level since July 2009.

New Zealand Dollar

Sterling smashed its way to a new five-year high against the ‘Kiwi’ Dollar yesterday after registering an outlandish 600-pip daily gain. This brought GBP/NZD to a level 1,500 pips higher than it stood at just eight days previously.

During the Asian session it was reported that economic growth in New Zealand slowed from a downwardly revised 0.7% to just 0.2% during the first quarter of 2015, which brought the annualised GDP figure down from 3.5% to 2.6%. The results were much lower than markets had anticipated and this prompted another market-wide selloff of the New Zealand Dollar as investors hedged against the increased possibility of further interest rate reductions from the Reserve Bank of New Zealand.