FOREX watch: Pound higher on data, BoE minutes
Data from the UK have topped headlines this week, giving investors a closer look at British fundamentals. Wednesday marked the release of highly anticipated employment figures, followed by the official minutes from the July Monetary Policy Committee meetings. Although monetary policy was left unchanged during the last meetings, investors speculated whether incoming Governor Mark Carney was outvoted by his colleagues. As a vocal supporter of quantitative easing, there was heavy speculation that Carney would vote in favour of more easing during his first interest rate decision.
Wednesday’s minutes revealed no such thing, as the MPC stood united on stimulus and interest rates. The Committee voted 9-0 in favour of holding both the lending rate and stimulus program steady at 0.5 percent and £375 billion, respectively.
Pound pairs rose mightily as the markets absorbed the minutes, adding to the upbeat jobs data showing less unemployment in the British economy. The June Claimant Count Change declined by 21.2K, beating expectations of an 8.0K decline. Average earnings including bonus also beat expectations, counteracting Tuesday’s inflation report. Bonus-laden earnings grew 1.7 percent in May (3Mo/Yr), after the consensus called for a 1.4 percent hike.
On Tuesday the Consumer Price Index showed its highest reading in 14 months, reaching 2.9 percent for the year-ended in June, just barely avoiding the BoE Inflation Letter.
The pound advanced almost 0.6 percent against the euro in European trading, a trend that continued into the New York session. The EURGBP closed the day at 0.8635 after hitting a session low just shy of the 0.86 line.
The US dollar declined 0.46 percent against the pound, despite upbeat CPI figures on Tuesday. The GBPUSD pair closed New York trade at 1.5223. Over the past five days the pair has advanced more than a quarter of a percent, taking advantage of broad US dollar weakness emanating from last week’s Bernanke speech.
The British economy is showing signs of gradual recovery, but growth remains in its nascent stages. Despite better-than-expected employment figures, the Kingdom’s unemployment rate was left unchanged (7.8 percent). UK unemployment has been on the rise since November 2012, and has teetered on the edge of 8.0 percent in 2013.
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