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Pound gains on unemployment rate
Published on 12.07.2017 12:51

The British pound is on the comeback trail today after the unemployment rate in the UK hit its lowest level in over 30 years but with wage growth following to keep up, some say it is a dead bounce

At 10.24am (GMT) the British currency was trading at $12861 after hitting a low of $1.2808 and up from $1.2847 in yesterday’s close.

The unemployment rate fell to 4.5 percent last month, but it is the wage growth in the UK that is still causing a headache for the Bank of England, coming in at 1.8 percent which is well below the latest inflation figures at 2.9 percent and some within the BOE like the deputy governor are calling on his fellow board members to leave rates unchanged for the time being,

"In my opinion, it is a bit tricky at the moment to make a decision to raise rates. I am not ready to do it yet," noted Bank of England's deputy governor Ben Broadbent

"There is reason to see the committee moving in that direction higher interest rates but there are still a lot of imponderables." He added.

The pound has now become a very interest rate sensitive currency and some analysts are warning investors about placing their bets on any rate hikes in the nearest future out of fear being burnt,

"Investors who sought fresh insight into the outlook on UK interest rates were left empty-handed on Tuesday after Bank of England’s Deputy Governor Ben Broadbent maintained a safe distance from monetary policy discussions “noted FXTM Research Analyst Lukman Otunuga

"Although the hawkish remarks made a couple of weeks ago by BoE’s Mark Carney and Andrew Haldane may continue to support rate hike expectations in the background, questions should be asked whether the central bank will actually raise interest rates during such fragile economic conditions”. He added.

The material published in on this page is produced by the FIBO group companies, and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC; furthermore it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Andrew Masters

Analyst

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