LONDON: Sterling stayed near an 11-month low against the dollar on Wednesday, giving up early gains as weak jobs data did little to shake a growing conviction that UK interest rates will not rise until well into 2015.
Jobs growth in Britain was at its slowest in more than a year in the three months to August, official data showed, even as the unemployment rate fell more than expected. Workers' earnings inched up, lagging far behind inflation.
The Bank of England has said that any rise in interest rates from their historic lows will be dependent on economic data, especially wage growth.
In the wake of Tuesday data showing inflation slowing sharply as food and motor fuel prices fell, sterling fell as low as $1.5878 in Asian trade - its weakest since November 2013.
After Wednesday's employment data, sterling hit a high of $1.5940 but quickly slipped back and was last trading at $1.5915, flat on the day.
"The key still remains this relentless downward pressure in imported inflation," said Simon Derrick, head of currency research at Bank of New York Mellon.
"If you have no imported inflation, if there is no desperate need to raise rates, why should sterling be the place to park your money at the moment?"
Against the euro, sterling strengthened to 79.50 pence per euro, up 0.1 percent on the day.
Expectations that the BoE would be the first major central bank to raise rates drove sterling to a six-year peak against the dollar in July.
But increased signs of economic weakness - partly the result of a spillover from the euro zone - and the sharp fall in inflation have poured cold water on those expectations, and sterling has fallen 7.5 percent since July.
BoE Governor Mark Carney struck a somewhat dovish tone on Monday, saying the bank's rate-setting committee would have to take into account "a more modest global recovery, particularly if that's the case in Europe".
"The lack of wage growth remains a thorn in the side of an otherwise fairly robust recovery," said Ben Brettell, a senior economist at financial firm Hargreaves Lansdown.
"The absence of inflationary pressure - both in prices and wages - makes holding interest rates at 0.5 percent a straightforward decision, and as such this week's data may have come as something of a relief for Mark Carney and his colleagues."
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