The Pound Sterling to US Dollar (GBP/USD) exchange softened on Wednesday as Bank of England Minutes countered the effects of the release of positive UK wage growth and unemployment claims data, the ‘Greenback’ remains supported as market attention turns to the evening’s Federal Reserve policy statement.
UK Unemployment Falls
Data published by the London based Office for National Statistics (ONS) showed that unemployment continued to fall in the third quarter of the year and that earnings growth overtook inflation for the first time since March, adding to signs that the nation’s labour market is continuing to strengthen.
The statistics office showed that wages including bonuses grew by 1.4% from the previous year and was up from the 1% rise recorded in the third quarter. Average earnings excluding bonuses increased by 1.6%, a jump from the previous months revised figure of 1.2%.
Unemployment fell by 63,000 to take the total number of UK citizens out of work to 1.96 million. The overall unemployment rate remained at 6% the lowest level seen since 2008. Economists had been forecasting for the jobless rate to fall to 5.9%.
The positive data could offer some support to the Conservative dominated coalition government, which has been criticised for the lack of pay increases.
‘It helps the Conservatives in creating a positive story about where the economy is heading which may help them. But the past is still one of four years of a heavy squeeze on consumers budgets and that is not going to be erased by six months of gains,’ said Rob Wood, an economist at Berenberg Bank.
Despite the positive data releases the Pound softened against the US Dollar as the minutes of the Bank of England’s December policy meeting showed that policy makers continued to vote 7-2 in favour of leaving interest rates unchanged at the record low level of 0.5%.
Federal Reserve Meeting in Focus
The minutes showed that despite the rise in wage growth it was not enough to warrant a rise in interest rates. Economists are now expecting a rate rise to occur before the end of November next year a stark contrast to earlier predictions that rates could rise as soon as February.
The US Dollar is forecast to make further gains overnight if policy makers choose to alter their forward guidance. The Fed is expected to drop its vow to leave interest rates low for a ‘considerable time’.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate
The Pound Sterling to US Dollar exchange rate hit a session high of 1.5743
The Pound Sterling to US Dollar exchange rate hit a session low of 1.5673
The Pound Sterling to US Dollar exchange rate is trading in the region of 1.5718