The UK unemployment rate fell to 6.6% in April. 27,400 people left the ranks of the unemployed in May. Both figures exceed expectations. The UK was expected to report another drop of 25K people from the ranks of the jobless in May (Claimant Count Change) similar to that of April: originally reported -25.1K and now revised to -28.4K. The unemployment rate for April was expected to tick down to 6.7% from 6.8% reported in March. The Average Earnings Index rose by only 0.7%. It was expected to rise by 1.2%, after +1.7% in March, now revised to +1.9%. Nevertheless, this is a good report in general.
GBP/USD was shaking before the publication, trading around 1.6750. It is now climbing to resistance at 1.6770 but is hesitating at this level.
Analysis: A UK rate hike could happen already in 2014
Update: GBP/USD is now climbing above 1.6770. The drop of 0.2% points in the unemployment rate certainly makes it harder for Mark Carney to maintain a low interest rate.
The pressure on the Bank of England to hike the interest rate is rising. The 0.50% rate that accompanies us since March 2009 begins seeming inappropriate as the economy continues steaming forward. The housing sector, especially in London is considered bubbly by some and with a broadening recovery and the halt in the fall of inflation, the pressure is growing.
Markets are pricing a rate hike in early 2015, but we cannot rule out a move beforehand. In the last rate decision, the BOE decided to leave the interest rates unchanged, as usual. The meeting minutes are released next week, and they could show that one or two members already voted for a rate hike.
1.6720 provides support, followed by 1.6670. 1.6770 is resistance, followed by 1.6840. For more, see the British pound prediction.
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