The pound dropped after data released this morning revealed weaker-than-expected UK wages for the three months to April. The Office for National Statistics said average earnings growth including bonuses slowed to 4.0 pct over the period from a year earlier after a downwardly revised 4.4 pct rise in March. The figure is well below analysts' expectations for the reading to remain unchanged from the initial estimate for March of 4.5 pct. Excluding bonuses, meanwhile, wage growth remained benign at 3.6 pct. This will be good news for rate-setters at the Bank of England who had expressed concerns that rising price pressures within the wider economy would feed through into wage deals. "These are very encouraging figures for the Bank of England, indicating that wage growth is still one inflationary dog that isn't biting," said Howard Archer at Global Insight. The news caused the pound to fall, dropping to a low of 1.9678 against the US dollar from 1.9717 before the figures were released, while the euro rose to a high of 0.6747 stg from 0.6737 previously. By 10.06 am, sterling had recovered slightly but remained below its previous levels, trading at 1.9687 against the dollar and at 0.6736 per euro. Nevertheless, the numbers are unlikely to alter market expectations the Bank of England will deliver at least one more quarter point interest rate rise, quite possibly as soon as next month. Daragh Maher at Calyon noted the Bank of England's preoccupation has moved away from the labour market towards worries about firms' rising confidence in their ability to raise prices. He added the figures also showed unemployment falling further, which may highlight concerns about the lack of spare capacity in the economy. "The tightness of the labour market will be used by the hawks as being illustrative of the lack of spare capacity in the economy at the moment," he said.