Pound makes gains on unemployment data

Sterling rose slightly on Wednesday, up sharply for most of the day on stronger than expected UK jobs data, before losing ground on a Financial Times report on the Bank of England’s quantitative easing programme. Rates this morning stand as follows:

GBP/EUR 1.0785
GBP/USD 1.6113
GBP/AUD 1.7490
GBP/NZD 2.1550
GBP/ZAR 11.637
GBP/JPY 144.12
GBP/CHF 1.6318

UK Unemployment
Official statistics showed the unemployment rate held steady at 7.9 percent in August. Economists had expected a rise to 8 percent. Because the rise was less than forecast, the pound rose. The number of Britons claiming jobless benefit rose by 20,800 in September, less than expected and the smallest rise since May 2008.

This was enough to trigger a relief recovery but the market is still broadly bearish on sterling because of Britain’s deteriorating fiscal position and the likelihood of interest rates staying low for a long period.

“The fact that sterling is stronger is evidence of positioning rather than the strength of the data, because in reality the data weren’t all that much stronger than expected,” said Paul Robson, currency strategist at RBS Global Banking in London.

Expectations rates will stay at record lows of 0.5 percent and that the BoE may extend its QE programme have pummelled the pound in recent months and are making traders pessimistic about its outlook.

The latest unemployment data comes a week before the Office for National Statistics (ONS) releases its first estimate for how the UK economy performed between July and September.

Despite some signs of economic improvement, analysts remain unsure as to whether the economy will post growth and therefore exit recession. If the economy contracts again, it will be the first time that the UK has endured six successive quarters without economic expansion.

Todays Data
There is no data of note for the UK today, with most data coming from the EU and USA. We also have some inflation data from Australia. Look out for the ECB monthly report which is a detailed analysis of the prevailing economic situation and the risks to price stability. It also provides articles on a wide range of topics related to the tasks of the ECB.

EU – ECB Monthly Report
EU – Consumer Price Index
US – Consumer Price Index
US – Jobless Claims

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