Pound bounces back to 6-week high after BoE minutes, employment data

Sterling jumped after the Bank of England said all the nine members of the monetary policy committee voted to keep the policy unchanged at this month's review while better than expected jobs data further boosted the UK currency.

GBP/USD rose to 1.5442, matching the six-week high touched two days ago, and up 0.55% from the previous close. The pound is now 3.3% off the multi-month low of 1.4951 touched on 23 January.

The BoE minutes released on Wednesday showed that short-term as well as long-term interest rates in the UK had fallen a little on the month and, based on information from OIS rates, an increase in Bank Rate to 0.75% was fully priced in by June 2016.

"The expected pace of tightening thereafter had slowed further, with the implied level of Bank Rate at the end of 2017 below 11⁄4%."

The BoE said recent survey indicators had suggested that the moderation in GDP growth at the end of 2014 might be short-lived.

"Overall, the surveys remained consistent with growth around its historical average and Bank staff continued to expect GDP growth in the final vintage of data to be 0.7% in 2015 Q1."

Jobless claims in the UK decreased 38,600 in January, data on Wednesday showed, when analysts had been expecting a fall of just 25,000. The decline in December was 35,800.

The growth of average earnings excluding bonus of UK employees slowed to 1.7% from a year earlier in the three months to December from 1.8% in the quarter to November. However, earnings including bonus rose 2.1%, up from 1.8% in November and beating analysts' estimates of 1.7%.

The ILO unemployment rate meanwhile dropped to 5.7% from 5.8% against the market consensus of a repeat.

"After months of tentative improvement, today's labour market figures have finally shown strong wage growth – an unambiguously bullish sign for the UK economy and for sterling," said Ranko Berich, head of market analysis at Monex Europe.

EUR/GBP has reversed the entire Greek optimism-driven gains of Tuesday and dropped closer to the 12 February seven-year low of 0.7371. The cross traded as low as 0.7376, down from the previous close of 0.7434.

GBP/JPY rose to 184.15, up 0.55% on the day, after being down earlier in the day on the fresh growth cues from the Bank of Japan. The cross is now just four pips away from the one-month high of 184.20.

The pound had fallen 5.3% against the yen in January and so far this month, the UK currency is up 4.15% against the Japanese unit, reversing a good portion of the previous month's losses.