The Office for National Statistics released the ILO Unemployment rate for the 3-months to February, which dropped to 6.9% from the previous reading of 7.1%. Employment was 239,000 higher than for September to November 2013 and 691,000 higher than a year earlier (ONS). The release shows a significant improvement in the unemployment rate, and poses a headache for the Bank of England. Mark Carney detailed under his forward guidance that the threshold for increasing interest rates would be the unemployment rate of 7%. As the national employment situation improved, at a faster pace than forecast, Carney has attempted to refocus the requirements towards the “output gap,” something that is difficult to measure.
In the FX markets sterling had been trading up towards the highs of 2009, as traders believe the BoE will be forced to raise interest rates sooner than forecast. Cable has rallied to a new daily high above 1.68, trading up to 1.68169. The improving economic data, along with concerns of a property bubble will add pressure on the MPC to increase interest rates from 0.50%.