UK wages hit by soaring inflation.

Pay fell at the sharpest pace on record between April and June, official figures show, as soaring inflation continued to weigh on earnings. Wages, when taking into account rising prices, fell by 3% on the year, said the Office for National Statistics. Household budgets are being hit by soaring energy bills as well as higher food and fuel costs. The rise in prices has fueled the UK inflation rate to a 40-year high and it is expected to rise further.

The rising cost of living has prompted calls from workers and unions for pay rises, with some sectors, such as the rail industry, taking strike action in recent weeks. Last month, the government announced pay rises for millions of public sector workers including teachers, nurses, doctors, police officers, and members of the armed forces. However, most wage increases awarded were below the current rate of inflation of 9.4%, with ministers arguing large rises would fuel more price rises for goods.

There was also some disappointing macro news from the US economy, although it was not in the form of any top tier data. Both the regional Empire manufacturing and homebuilder sentiment surveys for August missed to the downside of expectations. From a currency viewpoint, the dollar was holding a firmer tone against the backdrop of sub-par macro news flow. This means the dollar has recovered the ground it lost in the aftermath of last week’s US CPI data.

Europe is facing a sharp rise in power bills driven by sky-rocketing gas prices, as war in Ukraine and European sanctions on Russia heighten concerns over the security of gas supplies. Russian gas flows to Europe via some major pipeline routes remained at steady, albeit low, levels on Tuesday morning, operator data showed. Russia cut flows on the pipeline to only 20% of capacity on July 27, citing maintenance work.

European Union countries are largely responsible for their national energy policies, and EU rules allow them to take emergency measures to protect consumers from higher costs. The European Union in July asked its member states to reduce gas demand voluntarily by 15% this winter with the possible introduction of mandatory cuts.

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