The British pound was probably one of the best performing currencies today. Even when the sharp weakness in the Dow caused a sea of red in the foreign exchange market, the British pound held strong against the US dollar.
Given that the Bank of England minutes were mixed, this strength most likely stemmed from the stronger employment numbers. The amount of people claiming unemployment fell by 12.8k last month, which was four times greater than the market’s expectations. Average wages also climbed, which suggests that tomorrow’s retail sales numbers could be stronger than expected. As for the BoE minutes, the committee voted 8 to1 to leave interest rates unchanged. They were concerned about the impact of the credit markets and even considered a precautionary rate cut, but growth had not slowed enough to warrant one and inflation is still projected to remain near their 2 percent target.
Written by Kathy Lien, Chief Currency Strategist for DailyFX.com