Sterling, greenback weaker on data

Story link: Sterling, greenback weaker on data

Sterling was weaker on Wednesday on the news that unemployment in the UK had grown at its fastest rate in thirteen years in February, as 14,600 new unemployment claims were filed during the month, many more than the expected 3,000 new claims. In addition, earnings growth was at 3.5 percent in January, far below the 4.5 percent level set by the Bank of England as in tune with its inflation target. The new data revived hopes that UK interest rates will be cut soon.

In reaction, sterling dropped 0.3 percent to £0.6900 in relation to the euro. It also lost 0.3 percent versus the Swiss franc, to SFr2.2682, although it remained about the same at $1.7459 against the US dollar, which was having its own problems on the day.

New data from the US showed that net inflows were at only $66 billion in January. It was the second consecutive month in which inflows were not enough to cover the US trade deficit. While some analysts questioned the importance of the new numbers, the fact that they were released only a day after figures showing that the US current account deficit had reached 7 percent of the gross domestic product in the last quarter of 2005 made some investors nervous.

The greenback lost 0.3 percent to the euro, to $1.2053, and dropped 0.2 percent to ¥117.32 versus the Japanese yen.

Meanwhile, the Chinese renminbi had its largest one-day advance against the US dollar since it was revalued last year, gaining 0.12 percent to Rmb8.0377. Analysts, however, did not expect this move to be the beginning of a trend upward, despite pressure being applied to China by the US to let the renminbi increase in value at a more rapid pace.