The pound approached a four-year high against the dollar after the U.K. unemployment rate fell more in the three months through February than analysts forecast, adding to signs the economy is gaining traction.
Sterling appreciated to a six-week high versus the euro as the jobless rate dropped below the 7 percent threshold that Bank of England Governor Mark Carney has set as an initial guide for considering increasing interest rates. The report also showed wage growth accelerated to 1.7 percent, matching the inflation rate in February. U.K. government bonds declined, with 10-year yields rising the most in two weeks.
“The unemployment data is pretty encouraging and we like sterling from here,” said Josh O’Byrne, a foreign-exchange strategist at Citigroup Inc. in London. “This opens up the possibility that the Bank of England may need to raise interest rates sooner than the market is expecting, which could spur on the sterling rally.”