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British Pound Soars as UK Unemployment Rate Drops to 7.1 Percent

British Pound Soars as UK Unemployment Rate Drops to 7.1 Percent

David Maycotte,

Talking Points:

  • UK Unemployment Rate Fell to 7.1% in December, the Lowest in Five Years
  • The British Pound Soared Against the US Dollar on Hawkish BOE Policy Bets
  • Markets now look to UK Quarterly Inflation Report on Feb. 12 for further cues

.

The British Pound moved dramatically higher after UK Unemployment Rate fell to 7.1 percent, the lowest in five years, exceeding economists’ forecasts calling for a print at 7.3 percent. The Bank of England has said it would consider raising interest rates once the unemployment threshold reached 7.0 percent. Meanwhile, minutes from January’s MPC policy meeting showed officials expected the jobless rate threshold to be hit “materially earlier” than anticipated.

However, the minutes also showed that BOE policymakers see “no immediate need” to raise the benchmark lending rate even if the 7 percent jobless rate barrier is reached in the near future. According to DailyFX Analyst David Song, this statement may be the fuel to the fire that increases speculation that the BoE will lower the unemployment threshold to 6.5% from 7.0% in its quarterly inflation report released February 12.

On the technical front, GBP/USD pushed above resistance at 1.6516 following the data release. Senior Technical Strategist Jamie Saettele sees the next significant upside barrier at 1.6550, with a push beyond that exposing 1.6602.

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GBP/USD 5-Minute Chart. January 22, 2013

British_Pound_Soars_as_UK_Unemployment_Rate_Drops_to_7.1_Percent_body_Picture_1.png, British Pound Soars as UK Unemployment Rate Drops to 7.1 Percent

Charted created by David Maycotte using Marketscope 2.0.

-- Written by David Maycotte, DailyFX Research Team. Questions, comments or concerns can be sent to instructor@dailyfx.com.

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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