Pound Rises on UK Jobless Claims Data as Gilts Fall

By TraderVox.com

Tradervox.com (Dublin) – After the release of Bank of England Monetary Policy Committee meeting minutes, government bonds dropped as investors pared bets that the BOE will and stimulus next month. The ten-year yields climbed to the highest in four weeks after the release as the pound strengthened against the dollar to one-week high when jobless claims report showed an unexpected decline in September. The report also indicated that the unemployment in the country dropped to the lowest in a year.

John Wraith, who is a strategist in London at the Bank of America Merrill Lynch, said that the minutes showed significant differences in the path that should be followed regarding additional stimulus. He also added that the expectations of the Bank of England doing more have been tampered with following the release of the minutes. The report indicated that some members of the Monetary Policy Committee thought that there was room for more asset-purchases, but the committee was unanimous in voting to keep the stimulus package at 375billion pounds. They also voted 9-0 on holding the benchmark interest rate at 0.5 percent.

According to Berenberg Bank Chief Economist Robert Wood, the next MPC decision in November is too tight to call. He, however, suggested that following the labor market report and considering the minutes of their last meeting, the market is moved slightly to think that there will be no change in the current monetary policy. The Office of National Statistics released a report yesterday showing that the jobless claims fell by 4000 to 1.57 million in September. The report also indicated that the total joblessness measured by the International Labor Organization had declined to 7.9 percent in the third quarter.

The pound, which has gained by 0.7 percent in the last six months, appreciated by 0.3 percent against the dollar to trade at $1.6166, after reaching its strongest level of $1.6178, which was last seen in October 5. The UK currency fell against the euro by 0.3 percent to exchange at 81.23 pence per euro.

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