The currency blog

And it came in the form of the unemployment numbers…the number of Britons claiming unemployment benefits fell unexpectedly by 32,300 in Feb against the expectation for a rise of 8,000. January’s reported rise of 23,500 was also slashed to 5,300. This fall is the biggest monthly fall since November 1997 and the claimant count rate eased to 4.9%- the lowest since August 2009.

This is timely feedback on the job sector for the Labour government as we draw nearer to election day. Although the data is certainly encouraging we should not carried away as there is still a significant risk of a stuttering recovery. The labour market is still adjusting to fragile market conditions and this will lead to schisms in employment data. Looking forward we still have the threat of sharp public sector cuts which will lead to a rise in unemployment going forward. The pound has welcomed the news by rallying sharply against the USD and the Euro- gaining over 1% against the USD and 0.8% against the euro. This is a welcome relief rally for the pound which has been on the ropes especially since the beginning of March. The pound was also lifted by the MPC minutes which showed a vote of 9-0 to hold interest rates and QE. The unanimous decision has helped ease fears of further QE and division within the MPC.

The euro has held its neck above 1.37 today after testing over 1.38. The Aud has lost some of its shine after the Reserve Bank of Australia confirmed a more gradual approach to future tightening. The market had priced in a rate rise in April which now looks likely to roll to May.

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