UK jobs data lifts sterling

The pound is trading higher versus the US dollar after the UK reported an unexpected drop in unemployment.

The pound is trading at $1.5775, up 0.25% after the rate of UK unemployment fell to to 7.7%. Economists had predicted that it would remain unchanged at 7.8%. The claimant count, which is a slightly different measure of the labour market, showed the number of people claiming unemployment benefits dropped to 32,600. This information is particularly relevant since Bank of England governor Mark Carney made it clear that the £375 billion a month bond buying programme will stay in place until the jobless rate improves.

Due to the labour market moving in the right direction, and the Bank of England being more likely to reduce the quantitative easing programme, traders have bought the pound versus the US dollar. The £375 billion per month bond buying scheme is paying dividends, evidenced by the latest manufacturing, retail and construction purchasing manufacturing index data, which has shown all these sectors are growing at a faster rate than before. If UK economic data continues to improve, sterling could continue to gain ground versus the dollar.

Spot FX GBP/USD chart

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