Improving Employment Outlook Boosts GBP/USD

The GBP/USD jumped on Wednesday after the latest U.K. jobs report showed improvement. According to the Office for National Statistics, the number of people claiming unemployment benefits fell by 34,600 in February. Economists were looking for a 25,000 decline.

Traders rallied the British Pound because the strength of this report suggests the Bank of England may be closer to hiking interest rates sooner than expected. Gains were probably limited today because the latest minutes showed all nine members of the BoE Monetary Policy Committee voted in favor of maintaining the historically low benchmark interest rate and the stimulus.

The EUR/USD finished lower ahead of today’s U.S. Federal Reserve Monetary Policy Committee statement due to be released at 2:00 p.m. ET. The Fed is expected to keep its benchmark interest rate at a historically low level and maintain its plan to taper monetary stimulus by $10 billion per month.

Traders should watch for new guidance however. The central bank may mention holding interest rates at historically low levels until the unemployment rate falls below 6.5%. The Fed may also mention new plans to drive up growth since inflation has been sluggish and well below the central bank’s 2% target.

April Gold futures fell sharply on Wednesday as investors continued to lift long hedges and speculators continued to take profits and pare positions. Investors have been dumping gold since Crimean citizens voted over the week-end to secede from Ukraine and join Russia. Gold rallied sharply going into the referendum because many were betting on a violent reaction, however, this was not the case. As long as Russia maintains a military presence in the area, there is always the possibility of a skirmish, but the price action in gold suggests this is remote at this time.

May Crude Oil finished higher ahead of today’s Energy Information Administration inventory report. Last night, the American Petroleum Institute said crude stocks rose by 5.9 million barrels. This report may not have been a surprise to some since the U.S. government recently sold oil from its strategic reserve.

Because of the sharp sell-off from $104.48 to $97.00 over a short period of time, many traders feel the market is oversold technically which may be why it has been stabilizing over the past few days. A normal 50% correction should take the market back to $100.74.