U.K. Jobless Claims Free Falls Most Since 1997, GBPUSD Rallies
Jobless claims in the U.K. unexpectedly tumbled at the fastest pace since 1997 in February, indicating that the economic recovery in the region may be strengthening following the Bank of England’s recent decision not to pump more money into the economy as policy makers take a wait and see approach. The number of people out of work dived 32.3K in January from a downward revision of 5.3K, with economists expecting the reading to rise 6.0K, the Office for National Statistics said today in London.
Meanwhile, the claimant count rate slip to 4.9% in February amid expectations of 5.0%, while the ILO unemployment rate remained unchanged at 7.8% in January from the previous month. Moreover, weekly pay including bonuses quickened 0.9% in the three months through January from 0.7%, while regular pay added 1.4% and bonus slid 7.1% in the same time period. The data highlights an improved outlook for employment as the central bank earlier this week stated that it expects businesses to keep staff numbers stable in the coming months.
Looking at the minute chart, the British Pound rallied from 1.5213 to a high of 1.5380 following the better-than-expected release. Turning focus to the daily chart, the pair has recently crossed above the 20-day SMA, and looks posed to test 1.5440 in the near term as the Speculative Sentiment index signals further strength in the pair.
Going forward, investors are weighing in a zero percent chance that the Bank of England will raise interest rates twenty five basis points at its next rate decision meeting on April 8th, according to the Credit Suisse overnight index swaps, as central bank aims to encourage a sustainable recovery. Indeed, policy makers voted 9-0 to keep rates unchanged and maintain its 200 billion quantitative easing scheme as shown in today’s minutes of the meeting. Pausing rates “would allow the committee to continue to assess the effects of the cumulative loosening of monetary policy since September 2008, alongside emerging evidence on the upside and downside risks to inflation,” the minutes added. However, worrisome is the regions budget deficit which is almost as big as Greece’s at more than 12% of economic output, and earlier this week, Moody’s announced that the U.K. along with the U.S. is at risk of losing its AAA rating.
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Written by Michael Wright, DailyFx Research
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