The Great Britain pound was under pressure today as employment data was somewhat disappointing. The currency remained weak even as the central bank’s chief was talking about prospects for an interest rate hike.
The number of claims for unemployment benefits dropped by 25,100 in April. While the figure was not bad by itself, it was smaller than the projected drop by 30,700. The unemployment rate edged down by 0.1 percentage point to 6.8 percent as was expected, staying below the central bank’s target of 7 percent.
The Bank of England released its quarterly Inflation Report today. Governor Mark Carney said in his speech at the press-conference after the release of the report:
As time has moved on and the recovery has been sustained, the economy has edged closer to the point at which Bank Rate will need gradually to rise. The exact timing will inevitably be the subject of considerable speculation and interest. The ultimate answer will depend on the evolution of the economy, particularly the degree of slack, the prospects for its absorption, and the broader inflation outlook.
He also warned:
When Bank Rate does begin to rise, increases are expected to be gradual and limited, meaning that Bank Rate may need to stay at low levels for some time.
Carney echoed the Inflation Report which said:
The Committee judged that there was scope to make further inroads into slack before an increase in Bank Rate was necessary.
It looks like market participants interpreted the comments as a sign that the BoE is not going to tighten monetary policy as soon as some were hoping. The sterling tumbled as a result of such view.
GBP/USD dropped from 1.6824 to 1.6766, following the rally to 1.6874, and GBP/JPY slipped from 172.03 to 170.74 as of 22:51 GMT today. EUR/GBP advanced from 0.8143 to 0.8179, while its daily low of 0.8126 was lowest since January 2013.
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