By Harry Robertson
LONDON (Reuters) -The pound fell on Tuesday after data showed that growth in British wages slowed in the three months through November, supporting the idea that the Bank of England will cut interest rates sharply this year.
Sterling was last down 0.37% at $1.2679, having traded around 0.3% lower at $1.2683 before the figures were released.
Annual growth in earnings, excluding bonuses, came in at 6.6% in the September to November period, easing from a 7.2% rise in the three months through October.
Including bonuses, pay growth slowed to 6.5% from 7.2% in the three months to October, well below economists' expectations of a 6.8% reading.
The number of vacancies posted fell by 49,000 on the quarter in the October to December period, the Office for National Statistics said. The unemployment rate held steady at 4.2% in November.
"Signs that the labour market is gradually normalising will reinforce the view that rate cuts could come as early as May," said Jake Finney, economist at PwC UK.
The euro was 0.15% higher against the pound at 86.15 pence.
Traders on Tuesday expected around 125 basis points of interest rate cuts from the Bank of England this year, up slightly from before the data.
They see a roughly 93% chance of the first move lower coming in May, according to money market pricing.
The pound has slipped around 0.5% against the dollar this year as stronger-than-expected U.S. economic and inflation data has boosted the U.S. currency.
Sterling rallied 5.2% in 2023 as it recovered from a sharp drop the previous year and the UK economy performed better than expected.
"Another big drop in wage growth in November supports our view that domestic inflationary pressures are fading fast," said Ashley Webb, UK economist at consultancy Capital Economics.
"But the tightness of the labour market will probably mean that the Bank of England maintains its hawkish bias at its policy meeting in February."