The pound remained higher against the U.S. dollar on Wednesday, as data showing that the U.K. unemployment rate unexpectedly fell to a four-and-a-half year low in the three months to October continued to support demand for sterling.
GBP/USD hit 1.6393 during U.S. morning trade, the pair''s highest since December 12; the pair subsequently consolidated at 1.6397, advancing 0.82%.
Cable was likely to find support at 1.6220, Tuesday''s low and resistance at 1.6457, the high of December 11.
The pound strengthened broadly after the Office for National Statistics said the U.K. unemployment rate fell to 7.4% in the three months to October, the lowest level since April 2009. Economists had expected the jobless rate to remain unchanged at 7.6%.
The data fuelled expectations that the Bank of England may raise interest rates sooner than expected. In August, the central bank pledged to keep rates on hold as long as the U.K. unemployment rate remains above 7%.
The number of people claiming unemployment benefits fell by 36,700 in November, the ONS said, better than expectations for a decline of 35,000. October’s figure was revised to a drop of 42,800 people from a previously reported decline of 41,700.
Meanwhile, the minutes of the BoE’s December meeting said further significant gains in sterling could put the U.K. economic recovery at risk.
In the U.S., data showed that housing starts rose to 1.09 million units in November, the highest level in nearly six years, from 0.89 million in October, compared to expectations for an increase to 0.95 million units.
Building permits in the U.S. fell 3.1% to 1.01 million units in November, from 1.04 million units the previous month. Analysts had expected building permits to drop 4.7% last month to 0.99 million units.
Elsewhere, the euro was lower against the pound, with EUR/GBP dropping 0.87% to 0.8391.
Also Wednesday, a report showed that the Ifo German business climate index rose to a 20-month high of 109.5 in December, in line with forecasts and up from 109.3 in November.
Investors remained wary ahead of the outcome of the Federal Reserve’s final policy meeting of the year later in the trading day, with some expecting the bank to make a small reduction in the pace of its USD85 billion-a-month asset purchase program.
However, many believe that the bank will wait until early next year to start rolling back stimulus, despite recent indications the U.S. economic recovery is deepening.
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