GBP/CHF Rises After Better UK Unemployment Data

Sterling Strengthens as UK Unemployment Drops Below 7%

The pound has gained strength across the board this morning as the Office for National Statistics revealed on Wednesday morning that unemployment in the Uk had dropped to a five-year low. As a result, sterling gained around 0.3% against the swiss unit on Wednesday morning. The graph below shows the movement immediately following the announcement.

GBP/CHF

The ONS announced on Wednesday morning that the number of people out of work had fallen by 77,000 in the three months to February, hitting a five year low of 2.24 million. The official unemployment rate now stands at 6.9%, below the 7% threshold the Bank of England set last August as part of the terms of their ‘forward guidance’ programme. The central bank said last summer that they would consider an interest rate hike when the unemployment level dropped to 7%. However, this has happened far sooner than anticipated and the bank are now using other economic barometers as an indication of economic health.

Wednesday morning’s figures also revealed that average earnings in the three months to February rose by 1.7%, above the rate of inflation for the first time since the spring of 2010. The rate of inflation currently stands at 1.6% and with average earnings above that, real wages have finally started rising. It is the first time since the start of the economic crisis that unemployment has fallen below the 7% mark and at just over 30 million, the number of people in work is higher than it’s been in a generation. As a result, sterling has gained against most of the other major currencies, including the US dollar, Swiss franc and the euro.

Chief economic adviser at the ONS, Joe Grice, said of the figures:

“These figures – rising employment and falling unemployment and inactivity – continue the strong trend in the labour market that has been seen in recent
months. Self-employment has again been a prominent growth area.”

On the Swiss side of the cross, the franc took a knock on Wednesday morning, helping GBP/CHF rise to just under 1.48. The Swiss ZEW investor sentiment fell by 12 points in April, to 7.0 points. The subsequent weakening of the franc comes just days after Nestle and Roche, two Swiss giants, posted disappointing profits, blaming the strong franc for a slump in sales.

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