Inflation rate report weakens sterling, traders scanning it for strongest wage growth

The British pound edged lower on Wednesday before a monthly inflation report, which traders will be scanning for evidence of further price pressures after data this week showed the strongest wage growth for workers in a decade.

The better-than-expected UK wage data on Tuesday pushed the pound higher and briefly redirected attention away from ongoing Brexit negotiations and back to the UK economy.

The Bank of England has said tighter monetary policy depends on Britain's agreeing on a trade deal with the European Union. But it also wants to see signs of more wage growth, which could feed through to inflation.

A Reuters poll of analysts forecasts September data will come in at 2.6 per cent, slightly below August's 2.7 per cent.

Sterling shrugged off the standoff between the EU and Britain over Brexit and rose as high as $1.3235 on Tuesday. On Wednesday, it traded down 0.2 per cent at $1.3156.

The British currency also slipped versus the euro, down 0.1 per cent at 87.895 pence.

The consumer price inflation report is due at 0830 GMT.