Sterling rises as unemployment drops and inflation maybe on its way up

The British pound rose versus the greenback on Wednesday on an unexpected fall in UK jobless claims and after Bank of England minutes showed some policymakers concerned about inflation. The currency was boosted by data showing the biggest fall in the number of Britons claiming unemployment benefits in February since November 1997. Bank of England minutes showing a unanimous vote to keep monetary policy unchanged and some policymakers worried about inflation pressures also helped ease concerns the central bank may opt to extend asset purchases under quantitative easing. The pound pared some of its gains later in the session, however, as investors turned cautious ahead of Thursday's UK public finances data. "Cable has come off its highs, partly reflecting a recovery in the dollar across the board and partly some position-squaring ahead of UK public finances figures tomorrow," said Valentin Marinov, currency strategist at Societe Generale. The GBP/USD is currently trading at $1.5330 as of 20:22pm, GMT, with a bullish trend.

The euro dropped from a five-week high versus the dollar after a spokesman for German Chancellor Angela Merkel’s party said Greece should go to the International Monetary Fund if it needs aid, damping the currency’s allure. The yen and greenback fell after the Bank of Japan doubled a loan program aimed at countering deflation and the Federal Reserve kept its target rate unchanged yesterday, lifting demand for higher-yielding assets. Harvard University Professor Martin Feldstein, who warned almost two decades ago the euro would prove an “economic liability,” said in a March 13 interview in Geneva that Greece’s austerity plan will fail and the country may quit the single currency to fix its fiscal crisis. The EUR/USD is currently trading at $1.3737 as of 20:46pm, GMT, with a bearish trend.

Canada’s currency reached the strongest in almost 20 months versus the greenback after the Federal Reserve said it would keep interest rates near zero, spurring demand for currencies tied to economic growth. For the loonie, the outlook remains blue-skied on a number of Canadian-dollar-positive factors,” Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto, wrote in a note to clients. He cited higher-than- forecast wholesale sales data, crude oil prices and “benign acquiescence” from the finance minister and the central bank governor on the strength of the currency. The USD/CAD is currently trading at 1.0100 as of 21:00pm, GMT with a bullish trend.

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