IFX Market Report

Surprise fall in UK unemployment

The UK labour market data released yesterday were much better than expected. Claimant count unemployment fell 15.2k (consensus -4.6k), and last month's figure was revised to show a fall of 10.8k. The ILO rate of unemployment also came in better than consensus, falling to 7.8% from a previous 7.9%, compared to market expectations of a rise to 8.0%.

The minutes of the January meeting showed that the MPC voted unanimously to keep interest rates unchanged and maintain the QE programme at GBP200bn. The minutes stated that inflation in the short term would be further above target than the Committee had previously expected. Clearly Tuesday’s inflation release confirmed this.

The US dollar continued its upward march yesterday, strengthening across the board as commodities and global equities weakened. EUR/USD has fallen further touching a low of 1.4070 in Asia this morning.

Sterling remains well supported holding above €1.15.

Data from China released earlier this morning showed that the economy expanded by 8.7% in 2009, exceeding even the government's own initial expectations. The pace of expansion increased as the year went on, with GDP growth in the final quarter of 2009 rising by 10.7% from 2008. Alistair Heath reported in City AM this morning that Price Waterhouse Coppers expect China to be the largest economy in the world by 2020.

Intraday Support and Resistance Levels