Let’s take a closer look at the U.K. employment numbers and MPC meeting minutes and how they have affected the pound’s price action in early London session trading.
U.K. Employment: Upside surprises and revisions
As expected by market players, Britain’s unemployment rate remained at 7.2% in the three months to January. What they didn’t expect was the 34,600-drop in jobless claimants in the same time period (they expected a 25,000-drop) and a downward revision to claimants in the previous three months (-33,900 vs. -27,600 previous). This puts all the workers with work at a record of 30.2 million, up by 105,000 from last month’s reading.
Average weekly earnings also saw both a positive surprise and an upward revision to previous numbers. Earnings grew by 1.4% in the three months to January compared to the same period a year earlier, higher than the 1.3% estimates and 1.2% upwardly revised data from the previous three months.
MPC Minutes: Chillin’ like ice cream fillin’
Members of the Monetary Policy Committee (MPC) unanimously voted to keep the Bank of England’s (BOE) interest rates and asset purchases unchanged at 0.50% and 375 billion GBP respectively.
Other components of the report are nothing to write home about. The MPC members mentioned the recent Sterling strength but didn’t really express concern over it. In fact, they even said that a strong pound is one of the reasons why inflation isn’t expected to rise above 2.5% over the next 18 to 24 months.
On economic growth, Carney and his gang see a broader growth from household to business spending but still expect “some way to go” before growth is balanced and sustainable. Last but not the least, the central bankers aren’t expecting to consider a rate hike, at least until the unemployment rate drops to 7.0%. Tough luck for the rate hike junkies!
Surprisingly, the pound’s reaction to a decidedly positive jobs data and not-so-dovish MPC minutes was muted. At the time of writing GBP/USD is only up by 25 pips from its pre-release levels while GBP/JPY only saw a 27-pip gain. Does this mean that there are no more pound bulls around or are investors just digesting the details of the reports?