The UK unemployment rate has been brought into investors focuses following Governor of the Bank of England Mark Carney’s Forward Guidance. He stated that the interest rates would be held at the record low of 0.50%, until the unemployment rate drops to 7% from the current 7.8%.
The Bank of England’s forecasts that the unemployment rate will fall to 7% in 2016, though the markets are pricing an increase in interest rates in 2014. There are various caveats to the Forward Guidance, which has led to some analysts stating the timeframe the BoE is forecasting is unrealistic, and rates will have to be raised earlier.
The ILO Unemployment Rate is released at 9:30am (London) alongside other Labour data. Analysts are expecting the headline figure to be unchanged at a steady 7.8%. However if the rate of unemployment is reducing, this could add to the expectation that the Bank of England will be forced to raise rates earlier than predicted, which would give a lift to Sterling. There have been numerous positive data points for the UK economy in recent months, with Chancellor George Osborne, stating in a speech on Monday that that “Britain is turning a corner.”
Prior to the release Sterling is trading at a 3-month high against the Greenback and near multi-month lows against the Euro.