[B]UK Jobless Claims[/B] are set to add 24,500 in September, pushing the [B]Claimant Count Rate[/B] (unemployment rate) to a 22-year high of 5.1%. More of the same is expected going forward, with a survey of economists polled by Bloomberg calling for the jobless rate to top 9% in the second half of next year. While labor market weakness has been a foregone conclusion that has been priced into the exchange rate for some time, the market could prove sensitive to the release this time around with the release coming on the heels of yesterday’s disappointing inflation data. Bank of England Governor Mervyn King has recently voiced concerns that rising unemployment will weigh on wages to keep inflation below the central bank’s 2% target level into 2011 and possibly beyond, opening the door to speculation that the central bank may expand its asset-buying scheme and possibly lower the interest rate it pays on banks’ reserve deposits. Policymakers opted to hold off on any changes this month but many observers (including former MPC policymaker David Blanchflower) suggest a dovish shift will coincide with the release of the bank’s updated inflation forecast next month.
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