Search ForexCrunch

The UK reported a drop of only 24K jobless claims, below expectations. However, the unemployment rate for November fell all the way to 7.1%, much better than expected, and bringing it close to the Bank’s 7% target. Claimant Count Change  was expected to show a drop of 34K jobless claims in December, after seeing a big drop of 36.7K in November (before revisions). The unemployment rate for November was expected to drop from 7.4% to 7.3%. The meeting minutes from the last meeting showed consensus over both the interest rate as well as the QE program, which stands at 375 billion pounds, as widely expected.

Earlier, GBP/USD was sliding from the highs and traded around 1.6465 towards the multiple releases. The pair shot up immediately after the publications, rising all the way to 1.6532 before settling a bit lower, at around 1.6517 at the time of writing. Update: the pair continues higher, reaching 1.6537, and the move isn’t over yet.

As 1.6515 is a key level, the move is certainly a big breakout. Here is how it looks on the chart:

GBPUSD Breaking higher after UK unemployment falls January 22 2014

In the meeting minutes, the BOE was already aware of the faster pace in which unemployment is falling, and said there is no rush to raise rates if the unemployment rate hits 7% earlier. They indeed forecast that this level will be reached “materially earlier”, and that markets expected a rate hike in the spring of 2015.

In addition, the UK releases the Public Sector Net Borrowing number, which came out at 10.4 billion. It was forecast to squeeze from 14.8 to 12.1 billion pounds in December. Government spending cuts have been a focus of the current government. Average Earnings rose by 0.9%, a bit lower than 1% expected.

The pound enjoyed tail wind coming from the very strong retail sales number published on Friday: a gain of no less than 2.6%. The spectacular number pushed the pound higher against the dollar, and against other currencies.

The round 1.65 line serves as resistance, and 1.6450 as support. For more, see the Pound dollar forecast.