Brushing off the economic impact brought by Brexit vote temporarily, the UK unemployment posted a different kind of view as it remained steady with a little increase. In light of this optimistic outlook, the British pound found a breather and ticked remarkably higher.
The Office for National Statistics reported earlier today the addition of 106,000 jobs in three-months to August with 31.81 million people officially employed. The figures sent notion that the labor market was not fully hit by the decision of the Britain to leave the European Union and could still add more jobs in the rest of the year.
On an annual basis, there were more than 560,000 created jobs, according to the ONS. With this, the employment rate still stands at its highest level at 74.5 percent and the jobless rate remained at 4.9 percent. Also, average earnings jumped 2.3 percent in the year to August as the non-UK nationals working in Britain went higher as well.
The representative of ONS explained that these figures show that employment continued to grow over the summer and vacancies remain at high levels, suggesting continuing confidence in the economy. However, critics claimed that there’s more to do to assure the employment of young people. The negative notion was shrugged by ONS statistician Nick Palmer, whereas he lauded the small rise as more and more people continuously find jobs.
With the renewal of economic confidence, the Sterling rose 0.10 percent higher against the greenback during the mid-session. GBP/USD traded at 1.2308 after dropping approximately 20 percent against the U.S. dollar. The uptrend of the British pound was supported by the downfall of the greenback before the U.S. housing sector activity data.
After the dramatic fall last week (1), the sterling stayed in a tight trading range as its U.S rival appeared higher over December rate hike view. The currency met a narrow contraction at 1.27392 (2) and the candles kept on falling, going beyond the lower barrier. Then the pair pushed into the outer band (3), lacking power to grab a recovery. Surprisingly, the pair went beyond the upper barrier (4) which suggested a significant price increase.
Generally, the strength of the currency drives can put up a significant change in an underlying economy in the long term. Although in some cases, a weaker currency may be helpful in the recovery of a currency as imports become more expensive, reducing the trade deficit of the country. A stronger economy also serves as one of the key considerations of a rate hike. If the benchmark interest rate hike increases, a currency appreciation follows.
Meanwhile, the Bank of England keeps its interest rate lower as it seek for more stable economic and political recovery before making a necessary adjustment. This decision of the central bank of England was reportedly criticized by former foreign secretary William Hague. Mr. Hague allegedly said that the bank has been ignoring the public sentiments over the lower interest rates. Most of the experts believed that only higher rates could bring back the enthusiasm of foreign investors and pull the Bristish pound even higher after the financial uncertainties brought by Brexit vote. Apparently, the pressure is on for the BoE amid the negotiations over Britain’s full exit and the aching British banks.
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