Sterling rebounded during the day yesterday in the wake of better than expected unemployment figures from the UK, and an upward revision in 2014 forecast economic growth from the Office of Budget Responsibility to 2.7%. Although the unemployment rate remained unchanged at 7.2%, the number of people claiming unemployment benefits fell by 34,600 in February, well above the forecast level. The resulting strengthening in sterling against its major trade partners was aided by positive rhetoric from Chancellor George Osborne during the Annual Budget. This included a notable commitment to support UK exports, with the Government doubling lending to £3 billion. However, late on we saw the US dollar gain a cent against sterling as the Federal Reserve Chairperson Janet Yellen predicted that interest rates next year would be increased by a larger amount than previously forecast as the US economy has less spare capacity than thought.
Another major test for sterling will come today, when US unemployment claims are released. These are forecast to have fallen over the past month, and any strengthening of the US dollar could have a significant impact on sterling.
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