Pound Sterling (GBP) Exchange Rate Climbs as UK Unemployment Falls, Wages Rise

The Pound enjoyed a bullish relationship with the majority of its currency counterparts during Wednesday’s European session as investors considered the possible repercussions of the UK’s better-than-expected employment report. The over 100,000 increase in positions in the three months through December took the level of employment in the nation to its highest since records began. Average earnings including bonuses also increased, although wages excluding bonuses eased to 1.7%. Industry expert John Philpott said of the wage figures; ‘Although the December bonus season pushed growth in total average weekly earnings above 2%, underlying pay pressure as measured by regular average weekly earnings fell slightly. This suggests that the jobs rich economic recovery is still failing to boost labour productivity, which does not bode well for long term improvement in UK living standards, even if very low price inflation is at present helping to raise real incomes.’

However, Prime Minister David Cameron viewed the report more optimistically and stated; ‘We inherited a situation where far too many people were unemployed, where we weren't creating enough jobs in our country. Since I became Prime Minister, we haven't solved or tackled all of unemployment, but we have got 1.85 million more people in work today than when I became Prime Minister. I sit round that European Union council table with the 27 other countries - I was there last week. Britain, in the last four years, has created more jobs than the rest of Europe put together, so we are on our way.’

The strength of the employment figures outweighed any impact the Bank of England meeting minutes, also published this morning, may have had. The minutes showed that all nine members of the Monetary Policy Committee voted in favour of keeping interest rates on hold at the last gathering. As the European session progressed, the Pound was trading 0.7% higher against the Euro, 0.4% higher against the US Dollar, 0.7% higher against the Australian Dollar and 0.8% higher against the New Zealand Dollar. Further Pound movement could occur tomorrow as the Confederation of British Industry releases Trends Selling Prices and Trends Total Orders data. Trends Selling Prices are expected to decline while Trends Total Orders are believed to have increased.