Sterling suffered at the hands of the UK unemployment figures this morning as GBP/USD exchange rates fell almost as cent from $1.6730 down to $1.6640. The gains however, were short-lived for the dollar as the pound took advantage of some weaker than forecast data releases from the States in the afternoon.
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For the first time since April 2013 the UK saw a rise in unemployment with the number unexpectedly rising from 7.1% to 7.2%. The figures had an immediate impact on the FX markets but the damage was limited with the news that the number of people claiming jobseekers had fallen for the 15th consecutive month.
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Today's disappointing unemployment numbers have maybe taken some of the gloss UK economies recent upturn. However, with the States struggling to put together a good run of economic data releases it doesn't look like the pound is going to come under any pressure from the dollar anytime soon.
So what does that mean for exchange rates?
If todays unemployment figures are only a blip in the UK recovery then the door is still open for the GBP/USD cross to keep on rising. It would not come as a surprise if we saw exchange rates break $1.70 especially if we have a repeat of the U.S debt ceiling fiasco we witnessed last year. With the temporary plan that U.S. officials put in place last October due to expire at the end of February the dollar could easily lose more ground against the pound, despite the U.S. Federal Reserve's attempts to wind up its stimulus package.
Unless we see the UK recovery stall and the FED decide to end the on-going stimulus programme, I think it is unlikely we will see GBP/USD rates back below $1.60 anytime soon. Of course it impossible to predict but it just seems the pound has more going for it than the dollar at the moment.
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