The pound began the session overnight in good stead as labour market data showed the UK economy is a step closer to a recovery; however the optimism was short lived. Sterling reached highs of US$1.6798 as the unemployment rate fell to 7.8 percent in the third quarter from 7.9 per cent in the second quarter. Economists had expected a rise to 8 per cent. Although the data also showed the total number of people claiming unemployment benefits rose to 12 year highs, the finer points of the release showed the number of claimants for October rose by 12,900 outstripping the 20,200 expected, representing the smallest monthly increase since April 2008. The Average Earnings Index including bonuses also showed signs of growth rising by 1.2 per cent on a year earlier.
Bank of England Governor Mervyn King didn't share the same level of enthusiasm as the market reaction to the Jobs data, as he indicated the BOE will keep an open mind towards expanding the bond purchasing program. This spelled bad news for the pound with the currency crashing against major currencies, falling to lows of 1.6535 against the greenback. The premise of continued support of the UK economy suggests the UK economy is struggling to recover.
US equity markets advanced overnight as investors digested the latest Chinese industrial Production figures which surpassed consensus rising to 16.1 percent, representing a 16 year high. The market also found strength as Fed Reserve Bank of Dallas President Richard Fisher suggested the Central Banks current stance on interest rates could remain into 2011 as inflation and economic growth are likely to remain below desired levels. The greenback traded on a reactive basis against major counterparts failing to show clear direction, despite stronger commodity markets and gold hitting all time highs of US$1118.60.
Meanwhile, the Aussie dollar broke 15 month highs early in the European session surging to highs of US$.9345 - at the time of writing the Aussie remains composed buying just over 93 US-Cents after falling to lows of US$.9270 early this morning. Locally, the Australian Bureau of Statistics will today release our own labour report, which is expected to show the Australian workforce has declined by 10,100 in the month of October, to take our unemployment rate to 5.8 per cent.