Forex - GBP/USD higher after BoE report, UK jobs data

The pound traded up to session highs against the dollar on Wednesday after the Bank of England brought forward the date it expects the unemployment rate to hit the 7% threshold at which it will consider raising rates and revised up its forecast for growth.

GBP/USD rose 0.43% to 1.5972 during European afternoon trade, after rising as high as 1.6002 earlier.

Cable was likely to find support at 1.5877, the session low and resistance at 1.6050.

The pound added to gains against the dollar after the BoE’s quarterly inflation report said the unemployment rate will fall faster than it expected three months ago. BoE Governor Mark Carney said there is a "two in five chance" that it could be 7% at the end of 2014.

The bank reiterated that the unemployment rate falling below 7% would not automatically trigger an increase in interest rates.

The BoE said it now expects economic growth of 1.6% this year, up from 1.4% in August and growth of 2.8% in 2014, up from 2.5%. The bank still expects growth of 2.3% in 2015.

The bank said inflation fell back in the four months to October by more than expected at the time of the August report. The near-term outlook for inflation is lower than expected three months ago and inflation is likely to fall a little further during 2014, helped by the recent appreciation in sterling.

Data released on Tuesday showed that the annual rate of inflation in the U.K. slowed to 2.2% in October, the lowest since September 2012, from 2.7% the previous month. Economists had expected the inflation rate to slow to 2.5%.

The pound came off session lows against the dollar earlier following the release of stronger than expected U.K. jobs data.

The Office for National Statistics said that the number of people claiming unemployment benefits in the U.K. fell by 41,700 in October, better than expectations for a decline of 35,000 people.

September’s figure was revised to a drop of 44,700 people from a previously reported decline of 41,700.

The rate of unemployment ticked down to 7.6% in the three months to September the ONS said. Economists had expected the unemployment rate to remain unchanged at 7.7%.

Elsewhere, sterling was higher against the euro, with EUR/GBP down 0.56% to 0.8400, after falling as low as 0.8384 earlier.

In the euro zone, data released on Wednesday showed that industrial production fell 0.5% in September from a month earlier, but was 1.1% higher on a year-over-year basis. Economists had forecast a monthly decline of 0.3% and an annual increase of 0.2%.

Meanwhile, official data showing that the annual rate of inflation in Spain fell by 0.1% in October added to fears over growing deflationary pressures in the euro area. The downward trend in inflation prompted the European Central Bank to cut rates to a record low 0.25% last week.