Pound Pauses As UK Jobless Claims Rise Above Forecast
March 14 2012 - 8:00AM
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The pound halted previous session's rally versus other major
currencies in early European trading on Wednesday following a
report showed that the U.K. jobless claims increased more than
expected in February.
The Office for National Statistics said in a report that the
number of people claiming Jobseeker's Allowance rose by 7,200 from
a month ago to 1.61 million in February. Economists had expected
only an increase of 5,000. At the same time, the claimant count
rate remained unchanged at 5 percent, in line with forecast.
During three months to January, the unemployment rate came in at
8.4 percent of the economically active population, up 0.1
percentage point from the three months to October. It also matched
economists' expectations.
Meanwhile, the U.K. government is considering issuing new
"super-long" gilts, which will have a maturity of hundred years or
more, reports said citing Treasury sources.
In next week's Budget, Chancellor George Osborne is expected to
unveil a plan to issue "super-long" bonds which will have a
repayment date of 100 years or even longer to help "lock in" the
benefits of Britain's historically low interest rates for a very
long time, reports said.
European equities rose as the rating agency Fitch upgraded
Greece rating to B- from restricted default and the U.S. Federal
Reserve upgraded its outlook on the U.S. economy and reiterated its
intention to keep interest rates at "exceptionally low levels"
until late 2014.
Labor market conditions have improved further in recent months
and the unemployment rate is declining gradually, though still
elevated, the Fed said after its latest policy meeting.
Thus far, the U.K. FTSE 100 index advanced 0.45 percent,
France's CAC-40 index climbed to 0.77 percent and Germany's DAX
rose above 1 percent.
The pound that advanced to a 4-week high of 1.4581 against the
Swiss franc around 4:15 am ET moved slightly off shortly
thereafter. The pound-franc pair is presently hovering at 1.4545
with 1.45 seen as the next likely support level and 1.46 as the
probable resistance.
The pound that rose to a new multi-week high of 0.8297 against
the euro around 4:30 am ET pulled back to 0.8324 around 6:35 am ET.
On the downside, the pound may find target around the 0.8350
level.
The European currency has been trading weak since the Federal
Reserve on Tuesday hinted that there is no immediate need for
QE3.
Meanwhile, the common currency inched higher after the
industrial production in the 17-nation currency bloc rose 0.2
percent month-on-month in January, Eurostat said Wednesday. The
increase came in weaker than the expected 0.5 percent rise, but it
rebounded from December's 1.1 percent fall.
On a yearly basis, industrial production fell 1.2 percent in
January, slower than the 1.8 percent decrease in December. But the
annual fall was bigger than 0.8 percent fall forecast by
economists.
The pound that touched a 9-month high of 131.37 against the yen
around 4:30 am ET erased some of its gains shortly thereafter. The
pound-yen pair then traded in a range of 130.80 and 131.15.
The Bank of Japan said that it expects export growth to gain
momentum gradually, while industrial production is seen rising
moderately going forward. The economy is also expected to gradually
emerge from the current flat growth and return to a moderate
recovery path as the pace of recovery in overseas economies picks
up and reconstruction-related demand strengthens.
The sterling that rose as high as 1.5746 against the dollar
around 5:05 am ET erased some of its gains shortly. If the cable
weakens further, likely support level is seen around the 1.5650
level.
Dollar jumped on Tuesday's upbeat US retail sales data and the
Federal Reserve's fairly positive statement about the economy.
Looking ahead, the US export & import price indexes for
February are due out in the North American session.
Federal Reserve Chairman Ben Bernanke is scheduled to speak to
the Independent Community Bankers Association conference in
Nashville at 9:00 am ET.
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