British Pound Spikes Higher As U.K. Unemployment Falls to 7.1 percent

The British Pound traded sharply higher on Wednesday morning after the U.K. Office for National Statistics (ONS) reported that the U.K. unemployment rate from September to November of 2013 fell to 7.1 percent. The figure beat analyst expectations of 7.3 percent. According to the ONS data, for September to November 2013, there were 2.32 million unemployed people, down 167,000 from the period June to August 2013.

The Claimant Count Change, which measures the change in the number of people claiming the Jobseeker's Allowance (JSA), fell by 24,000 in December. The figure missed analyst expectations of a fall of 35,000.

Average hourly earnings also missed expectations, rising by a modest 0.9 percent versus 1.0 percent forecast.

In the wake of the employment data, the British Pound rallied to it's highest levels since January 2013 against the Euro and surged to a near three week high against the U.S. dollar.

The Bank of England (BOE) has said that it will consider raising interest rates from the record low level of 0.5 percent when the U.K. unemployment rate falls to a target threshold of 7 percent.

However, the latest minutes from this month's meeting of the Bank of England Monetary Policy Committee (MPC) led by Governor Mark Carney, showed that reaching the 7 percent threshold will not automatically trigger a rate hike.

Also published on Wednesday, the minutes stated; "Inflation had returned to the 2% target, however, and cost pressures were subdued. Members therefore saw no immediate need to raise Bank Rate even if the 7% unemployment threshold were to be reached in the near future. Moreover, it was likely that the headwinds to growth associated with the aftermath of the financial crisis would persist for some time yet and that inflationary pressures would remain contained. Consequently when the time did come to raise Bank Rate, it would be appropriate to do so only gradually."

GBP/USD Monthly Chart

Looking at the GBP/USD monthly chart we can see that price is nearing the recent high of 1.6597. A break above that price would mark the highest levels seen since August of 2011.