British Pound (GBP) Exchange Rate Turns Bullish as Unemployment Plummets
The British Pound achieved an almost four-year high against the US Dollar today as the likelihood of the Bank of England increasing interest rates sooner rather than later increased.
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Sterling rallied against the majority of its rivals as an unexpected tumble in the UK jobless level took domestic unemployment to a five-year low.
Economists had expected the unemployment rate to dip from 7.2 per cent to 7.1 per cent, but it actually fell to 6.9 per cent.
Wage growth also matched inflation, coming in at 1.7 per cent in the three months to February.
Economist Brian Hilliard, who participated in a Bloomberg News Survey concerning UK employment, was quoted as saying of the result; ‘This will change people’s expectations of when interest rates will rise because it was so far from the markets’ predication. The BoE new it was coming soon, so they were ready for it and had already diluted the importance of the unemployment rate.’
When the BoE initially introduced forward guidance it tied interest rate rises to the jobless level, stating that borrowing costs wouldn’t be increased until unemployment had fallen to a at least 7 per cent.
However, as unemployment began reaching this level more rapidly than anticipated, the central bank adjusted its stance accordingly, although today’s data is likely to go some way towards pushing the financial institution into increasing interest rates in the near future.
The Pound gained by 0.5 per cent against the US Dollar after the data was published and extended gains against the Euro for a third day.
Although the Australian and New Zealand Dollars were slightly stronger after Chinese growth figures surprised to the upside, Sterling was also stronger against these two South Pacific rivals.
The Pound is currently trading against the Euro in the region of 1.2132 and trading against the US Dollar in the region of 1.6790