Pound Halts Carney-Inspired Rally as Unemployment Rate IncreasesDavid Goodman
The pound fell against the dollar after a report showed U.K. unemployment unexpectedly rose in the three months through May.
Sterling erased an earlier advance versus the U.S. currency as the Office for National Statistics said the jobless rate increased to 5.6 percent, from 5.5 percent previously. The median forecast in a Bloomberg News survey of economists was for an unchanged reading. The report also showed U.K. wage growth fell short of analysts’ estimates, even as it accelerated to the fastest pace in more than five years.
Britain’s currency jumped on Tuesday as policy makers flagged the prospect of earlier-than-anticipated U.K. rate increases. In testimony to lawmakers, Governor Mark Carney said the time for the benchmark interest rate to rise from a record low is “moving closer,” while Monetary Policy Committee member David Miles said “the time to start normalization is soon.”
“There was a lot of bullishness building up regarding the U.K. and a lot of emphasis on this data,” said Ian Stannard, head of European foreign-exchange strategy at Morgan Stanley in London. “The data is generating a bit of a setback but I don’t think it will dent sterling bullishness too much. The fact that wage growth is still getting higher is not going to dent the hawks on the MPC.”
The pound fell 0.1 percent to $1.5620 as of 5 p.m. London time, having earlier climbed as much as 0.3 percent. The currency advanced 1 percent on Tuesday. Sterling appreciated 0.2 percent to 70.28 pence per euro, after appreciating 2.2 percent in the previous two days.
Investors don’t see rates rising until May 2016 at the earliest, according to forward contracts based on the sterling overnight index average, or Sonia.
U.K. government bonds were little changed, with benchmark 10-year gilts yielding 2.12 percent. The price of the 5 percent bond due in March 2025 was 125.04 percent of face value. The yield climbed 29 basis points in the previous five days.
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