Sterling Rebounds After Positive UK Employment Data and BOE Governor Carney Comments

UK Inflation Soft

GBP/USD fell to trade at its lowest levels since September 13th yesterday, after CPI data missed expecations. The UK Office of National Statistics showed that consumer price inflation in the U.K. slowed to the lowest level since September 2012 last month. UK year over year CPI came in at 2.2% versus 2.5% expected, remaining above the Bank of England’s 2.0% target. 

Positive UK Employment Data

However, the pound found its footing in Wednesday's London trading session, after the UK Office for National Statistics reported that Britain's unemployment rate fell to 7.6 percent in the three months to September, its lowest level in more than three years. The figure came out in line with expectations, falling from the prior reading of 7.7%.  The Claimant Count Change in October beat analyst expectations of -33.2K to come in at -41.7K. The Claimant Count Change measures the change in the number of unemployed people in the U.K. during the reported month. 

Quantitative Easing

On November 7th the Bank of England maintained its asset-purchase target at 375 billion pounds and held its benchmark interest rate at 0.5 percent. The unemployment rate falling from 7.8% to 7.6% in the three months to the end of September marks a move closer to the 7% level that will prompt the Bank of England to consider higher borrowing costs.

Comments From BOE Governor Carney

The British Pound rallied after Governor Mark Carney acknowledged the improved economic performance of the United Kingdom. He stated on Wednesday: "For the first time in a long time you don't have to be an optimist to see the glass is half full. The recovery has finally taken hold."

U.S. Dollar Strength

Meanwhile, the strength in U.S. dollar has been underpinned by speculation that the Federal Reserve will begin scaling back its $85 billion in monthly bond purchases as soon as December. Last week, the Bureau of Labor Statistics reported that the U.S. economy added 204,000 jobs in October, beating expectations of 125,000 by a wide margin.

GBP/USD Technical Outlook

Looking at the daily chart we can see that after forming a double top, yesterday price broke through important support to trade at the lowest levels in almost 2 months. However, the currency pair recovered on Wednesday's positive fundamental news and is holding above the prior support level of 1.5890.