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GBP/USD had been trading below the $1.59 level before the announcement, but is now up 0.5% at $1.5992 on news that the level of unemployment has dropped, as have the number of people claiming unemployment benefit. The figures for September showed the level of unemployment dropping from 7.7% to 7.6%, while the number of people claiming jobless benefits dropped by 41,700. The market consensus was for a drop of only 33,000.
The Bank of England has previously stated that monetary policy will remain loose until the unemployment rate drops to 7%. Today’s data is a sign the £375 billion stimulus package is working, and as the UK job market improves, so the pound could appreciate in value. Certainly the bond-buying scheme by the BoE is holding sterling back.
We are not expecting any major economic announcements from the US this afternoon. Janet Yellen of the Federal Reserve will testify in front of the Senate Banking Committee tomorrow at 3pm (London time), and traders will be looking for any clues as to when the Federal Reserve will begin tapering its stimulus package.