Financial markets are repricing expectations of when the Bank of England will make its first rate cut after official jobs market data showed softening in several areas, including weaker wage growth.
Excluding bonuses, wages were up 6.1% compared to a year ago, the Office for National Statistics report showed, down from 6.2% in the last update and now some way below last year’s peak of 8.1%.
"This has caused traders to reassess their bet that the Bank of England will delay cutting rates until August, and there are growing expectations that the first BOE rate cut will come in June and that there will be three cuts from the Bank this year," said market analyst Kathleen Brooks at XTB.
"As the market recalibrates its expectation for the first BOE rate cut from August to June, sterling is coming under downward pressure," she added.
Economist Rob Wood at Pantheon Macroeconomics said the BoE's monetary policy committee will take "confidence" from the downside wage growth surprise "that inflation pressures are fading".
But Paul Dales at Capital Economics felt the easing in wage growth "is probably still a bit too slow for the Bank of England’s liking. But there are encouraging signs that a more marked slowdown is just around the corner and that an interest rate cut in June is possible."
As long as the average month-on-month rise in earnings seen in the past six months of 0.3% continues, actual wage growth will fall "more markedly in the coming months", he said.
"That, alongside a fall in CPI inflation below the 2% target in April, could be enough to prompt a rate cut in the summer."
ING economist James Smith said: "Ultimately, the BoE will want to see more evidence of pay slowing before acting."
He said his prediction of a first cut in August remained unchanged.