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Forex - Pound hits session highs after upbeat U.K. jobs report

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Investing.com -

Investing.com - The pound rose to session highs against the dollar on Wednesday and touched fresh one-and-half year highs against the broadly weaker euro after official data showed that the U.K. unemployment rate fell to a fresh five year low, bolstering the outlook for the broader economic recovery.

GBP/USD was up 0.17% to 1.6784 from 1.6752 before the release of the data.

Cable was likely to find support at 1.6725 and resistance at 1.6825, the high of June 5.

The Office for National Statistics reported that the U.K. unemployment rate fell to 6.6% in the three months to April, the lowest since early 2009. The consensus forecast had been for a decline to 6.7% from 6.8% in the previous three months.

The claimant count, or number of people receiving jobless benefits fell by 27,400, ahead of forecasts for a for a decline of 25,000 people. April's figure was revised to a drop of 28,400 from 25,100.

However, the report also showed that weekly earnings rose by just 0.7% in the three months to April, still well below inflation, which hit 1.8% in April.

A faster-than-anticipated decline in the unemployment rate earlier this year prompted the Bank of England to update its forward guidance, under which it originally said interest rates would remain on hold until the jobless rate fell below 7%.

Earlier in the week, BoE policymaker Ian McCafferty said the bank is moving closer to hiking rates and added that economic data over the coming months would be key in determining the exact timing of a rate increase.

Sterling rose to its highest level since December 2012 against the euro, with EUR/GBP down 0.33% to 0.8057.

Borrowing costs in the euro zone have fallen in recent sessions due to the diverging monetary policy stance between the European Central Bank, the Federal Reserve and the BoE.

The ECB cut all its main rates to record lows on Thursday and for the first time imposed negative deposit rates on commercial lenders, in a bid to tackle persistently low rates of inflation and shore up the recovery in the region.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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