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British Employment – A Bitter Disappointment for the Pound

The turnaround in the British job market is in doubt, similar to the economy’s growth. The number of unemployed Brits leaped, hurting the Pound’s cautious recovery. Let’s see the numbers:

British Claimant Count Change, which is an early and important indicator of employment, showed a big rise in the number of unemployed people – 23,400. This erases the achievements of the past two months – drops of 15,200 and 10,800. It was also a bitter disappointment.

This was totally unexpected. Early predictions  stood on another month of drops – 14,600. British Unemployment Rate, a late figure that relates to December remained stable at 7.8% – exactly as expected.

GBP/USD falls modestly after this release. Note that the MPC Meeting Minutes were released at the same time and they might have an offset the effect. British policymakers voted  unanimously to stop the Quantitative Easing program. King didn’t out renewing it in the future.

Earlier in the week, British inflation rose to an annual level of 3.5%. Although this was marginally below expectations of 3.6%, this was sure above the government’s target of 1-3%. This would normally send the Pound shooting up on high expectations for a rate hike. Indeed, the central bank had to lay out the measures: Mervyn King was forced to write a letter to explain the reasons for this outcome and the measures taken.

But King continued his previous stance that this rise is only temporary, blaming the rise on the government’s higher VAT and the jump in fuel prices. He said that the bank is closely monitoring the situation but didn’t commit to any rate hikes in the near future.

The Pound did manage to rise though – riding on the dollar’s weakness rather than its own strength. The markets are tired of hearing about the Greek crisis – risk appetite returned. Stocks went up all over the world and the dollar was sold in favor of  “risky” currencies.

Although the Pound isn’t a high yielding currency, the dollar’s weakness was seen also in GBP/USD, and the Pound breached 1.5770 and peaked at 1.5814 a few hours before the release.

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.