The Pound edged up on Tuesday as data revealed pay growth was higher than predicted, bolstering investors’ forecasts the Bank of England will continue to increase rates in a bid to curb inflation.

The UK’s unemployment rate rose 3.8% in the three months to February, as opposed to holding steady at 3.7%, as forecast by economists polled by Reuters.

Yet pay growth for the three months to January was upwardly revised to 5.9%, holding there for the three months to February, far exceeding the 5.1% forecast in a Reuters poll. Not taking into account bonuses, wage growth held at 6.6%.

The Pound increased 0.5% against a weakening greenback to $1.2437. It also moved up 0.05% against the Euro to 88.25 pence after hitting its lowest level on Monday against the Euro since 23rd March.

“While the unemployment rate ticked up modestly to 3.8… wage gains remain incredibly strong,” according to the Head of European FX Research at HSBC Bank, Dominic Bunning.

“All this may see the BoE take a less dovish approach than other central banks in the G10, whose economies appear to be facing a more acute softening of economic momentum. Any signs of continuing economic divergence in the UK’s favour should result in a stronger GBP,” he added.

UK consumer inflation reached its highest level in over four decades in October at 11.1% and remained in double figures in February.

By the end of the year, the Bank of England forecasts inflation will fall under 4% as wholesale energy prices decline, yet markets continue to price in more central bank rate hikes.

Money markets forecast an 80% chance the Bank of England will hike borrowing costs for the 12th consecutive meeting in May to 4.5% from 4.25%, according to Refinitiv data.

In addition, they forecast an additional 25 basis point rate rise by September, whilst money markets expect the Federal Reserve will slash rates later in the year.