Sterling dips to $1.63 as investors await UK jobs data and the BOE report

Sterling hit a two-week low against the dollar on Wednesday, adding to losses as investors awaited a reading of UK employment and the Bank of England's Inflation Report later in the day. UK labour market data due later in the day is expected to show that the unemployment rate rose to 7.7 percent in June from 7.6 percent in May. The claimant count is seen at 25,000 in July, up from 23,800 in the previous month. The BoE's Inflation Report is likely to show a deeper recession than was factored in before, with inflation likely to remain below the 2 percent target over a two-year horizon. Bank of Tokyo-Mitsubishi currency strategist Lee Hardman said traders had been paring some of their long sterling positions ahead of the report due to the possibility that the central bank could also downgrade its growth forecasts. The GBP/USD is currently trading at $1.6400 as of 8:47am, London Time.

Recovery from the worst recession since the 1930s has begun as President Barack Obama’s fiscal stimulus derided as insufficient and budget-busting months ago takes effect, a survey of economists indicated. The new projections, following better-than-anticipated reports on manufacturing, employment and home construction, echo gains in investor confidence that have propelled the Standard & Poor’s 500 Stock Index to its high for the year. A rebound may help cushion declines in Obama’s approval ratings, political analysts said. “The fact that people for the first time in over a year are starting to look at some glimmers of hope plays to the prospect of some strength in the stimulus,” said Susan Molinari, a Republican strategist in Washington who advised Rudy Giuliani during his presidential nomination campaign in 2008.

European Central Bank council member Erkki Liikanen said the global economy is through the worst of the crisis and the next months will show whether the euro area economy has bottomed out. “The second half of the year will show if the euro area is past the trough in the economy,” Liikanen, who also heads the Bank of Finland, said in a television interview on Finland’s YLE TV1. “There are signs that the freefall is over” in the world economy, he said. The EUR/USD is currently trading at $1.4120 as of 9:20am, London Time.

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