British pound was trading in proximity to seven-week highs against the US dollar on Thursday, a day after Bank of Englands decision to maintain interest rates at current record low level until unemployment rate in the United Kingdom decreases to 7%.
GBP/USD hit a session high at 1.5518 at 7:00 GMT, the highest point in seven weeks, after which the pair consolidated at 1.5498. Support was likely to be found at 1.5460, while resistance was to be encountered at August 7th high, 1.5530.
Bank of England Governor Mark Carney linked the bank’s monetary policy outlook to unemployment for the first time, as he tried to quell investor bets on higher interest rates. It was unlikely bank policymakers to tighten policy as long as unemployment rate in the country surpasses 7%. Carney said that unemployment was not a target and that the 7% threshold might be set aside, if low interest rates begin to pose a threat to financial stability, in case the public’s intermediate-term inflation expectations rise or if intermediate-term inflation projections rise above 2.5%. If inflation rate is at 2.5% in 12 or 18 months from now, the policy of keeping the base interest rate at 0.50% till Q3 2016, will be set aside. As recovery was taking hold, economic growth in the United Kingdom was expected to be weak by historical standards.
In the mean time, the greenback was under pressure, as recent economic data from the United States fueled the uncertainty over the future of Federal Reserve’s monthly asset purchases. Chicago Federal Reserve Bank Chairman Charles Evans said that he would not rule out the withdrawal of central bank’s stimulus measures at the bank’s meeting in September.
The United States was to publish its weekly report on initial jobless claims later in the trading day. The median estimate pointed an increase by 9 000 during last week compared to the recorded five-year low at 326 000 the week before. Better than projected numbers would give support to the US dollar.
Elsewhere, the sterling was almost unchanged against the euro, as EUR/GBP cross ticked up a mere 0.01%, trading at 0.8612 at 9:05 GMT. Pound was slightly higher versus the Japanese yen, with GBP/JPY pair adding 0.07% for the day to trade at 149.34 at 9:05 GMT.
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