GBP/USD on session highs after UK jobless claims, unemployment reports

British pound rose to session highs against the US dollar on Wednesday, following the optimistic jobless claims report out of the United Kingdom, but however, gains seemed limited due to renewed fiscal debates in the United States.

GBP/USD touched a session high at 1.6058 at 8:30 GMT, also the pairs highest point since October 9th, after which consolidation followed at 1.6017, rising 0.13% for the day. Support was to be found at October 15th low, 1.5913, while resistance was to be encountered at October 9th high, 1.6120.

The Office for National Statistics (ONS) reported earlier on Wednesday, that the number of people who applied for unemployment assistance in the United Kingdom dropped the most since June 1997. The number of jobless claims fell by 41 700 in September, considerably outstripping preliminary estimates of a decrease by 25 000. In August the number of claims has been revised to a drop of 41 600 from a drop of 32 600 previously. The claimant count rate in the country decreased to 4.0% in September from 4.2% a month ago, while experts had anticipated that the rate will remain unchanged.

According to data by the International Labour Organization (ILO), the unemployment rate remained steady at 7.7% during the three months through August, compared to the same period one year ago, meeting expectations and confirming the rate, reported during the three months through July. The rate of unemployment is considered a key indicator, in terms of Bank of Englands monetary policy, as the bank has pledged to maintain interest rates at current levels until unemployment in the country falls below 7%.

The ONS also showed that the index of average earnings including bonuses climbed 0.7% during the three months through August from one year ago, marking an all-time low, below the expected 1.0% increase and following the 1.1% climb in the preceding period.

“Despite the potential for back-to-back declines in the unemployment rate over the past two months, achieving the 7 percent target is still going to be a challenge,” strategists at Morgan Stanley including Hans Redeker in London wrote in an e-mailed note, cited by Bloomberg. “Hence, we would expect any pound gains to remain limited.”

The yield on UK benchmark 10-year gilts was little changed at 2.81%, after having reached 2.82% previously, a level unseen since September 24th.

Meanwhile, market sentiment was still dominated by the fiscal debates in the United States, as the Senate leaders were in a haste to reach an agreement in order to end the fiscal crisis, while the latter gained intensity after Republicans’ last minute deal failed on Tuesday. The emerging Senate accord might be announced as early as today, though its passage in the Republican-led House of Representatives was still far from assured. The US Treasury has already warned that nations borrowing authority will lapse on October 17th.

Elsewhere, the sterling was gaining against the euro, as EUR/GBP cross fell 0.14% to trade at 0.8444 at 9:35 GMT. GBP/JPY was gaining 0.39% on a daily basis to trade at 157.68 at 9:37 GMT. The pound has gained 3.7% during the past three months, or the best performing currency after New Zealand dollar among 10 developed-nation currencies, tracked by Bloomberg Correlation-Weighted Indexes. The euro has risen 0.7%, while the US dollar has erased 2.4% of its value.