Surprising strength in the UK labour market.

According to statistics released on Tuesday, the employment market in Britain appeared to be considerably better than anticipated over the three months leading up to April. This data will support expectations that the Bank of England will continue hiking interest rates this year.

In the three months leading up to April, according to the Office for National Statistics, earnings excluding incentives increased 7.2% from the same period last year.

Reuters surveyed economists, who projected an average increase of 6.9%.

Sterling is now up 0.45% against the dollar.

The unemployment rate decreased from 3.9% in the three months prior to March to 3.8% in the three months that followed, contrary to expectations that it would increase to 4.0%.

The Bank of England will closely review April's numbers, which are the first to reflect the impact of a 9.7% increase in the minimum wage, in an effort to determine the long-term effects of Britain's recent run of double-digit inflation.

Officials from the BoE are likely to point out that the unemployment rate was lower than expected while the headline employment and pay figures exceeded all projections.

Prior to Tuesday's report, financial markets had already projected that interest rates would reach a peak of more than 5.5% by December, up from their current level of 4.5%. The strength of the most recent data might push these estimates even higher now that the futures market is open.

Compared to the 162,000 increase predicted by the Reuters survey, employment increased by 250.000 in the three months leading up to April.

(Sources: investing.com, reuters.com, ons.gov.uk)