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Pound rises as unemployment drop tests Carney rate pledge
by Chris Marshall on Sep 11, 2013 at 09:46
(UPDATE) Unemployment has fallen: progress for struggling Brits, more good news for the economy, but not so great for Mark Carney’s credibility.
The 7.7% unemployment rate for May to July defies most economists’ expectations of no change from the previous 7.8% rate and brings closer the 7% ‘staging post’ for a potential increase in interest rates, as outlined by Bank of England governor Carney in his 'forward guidance' strategy.
The report from the Office for National Statistics also showed that the number of people claiming jobless benefit fell by 32,600 in August.
The improvement may add to expectations that Carney’s bank will have to raise rates well before 2016. The pound rose 0.34% to $1.5786.
'With economic data continuing to come in strong and with order books looking very healthy we suspect that these positive trends in the labour market will continue and that the unemployment rate will fall more quickly than the bank of England predicts,' commented ING economist James Knightley.
Apple iPhone launches power ARM shares (08:38)
Shares in ARM Holdings (ARM.L), the firm behind the chip technology powering the iPhone, shot higher on Wednesday morning after Apple launched two new handsets.
ARM’s 4.5% gain to 983p came in contrast to the wider FTSE 100’s tepid movements, with Britain’s benchmark index flat at 6,584 after gains yesterday.
Shares around the world have brightened amid improving economic data, as well as signs that western military action against Syria is now less likely. US president Barack Obama yesterday asked congress to delay a vote on using force against Syria, instead saying he would pursue diplomatic efforts to force the Assad regime to give up its chemical weapons.
The oil price has fallen back sharply, having risen on fears about the Middle Eastern instability a strike on Syria would entail. Brent crude was trading slightly higher on Wednesday, with futures up 0.2% at $111.70.
However it was Apple’s new iPhone launches late on Tuesday that stole Wednesday’s business headlines. The firm launched both a top-end 5S handset, with a fingerprint sensor to unlock the phone, and a cheaper 5C model.
Analysts were lukewarm about the new launches. ‘Apple has likely ensured stable gross margins in the next couple of quarters,’ concluded Nomura’s Stuart Jeffrey. But, he added: ‘Until innovative new products are launched in 2014… we see limited upside in the share price.’
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