The pound advanced for a second week versus the dollar after the U.K. jobless rate unexpectedly fell below 7 percent, the threshold the Bank of England has set to start considering raising interest rates.
The pound rose to the highest level in more than four years against the dollar as Federal Reserve Chair Janet Yellen signaled the U.S. central bank will keep an accommodative monetary policy that has weakened the greenback.
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.
Britain’s unemployment rate dropped to a five-year low in February, underscoring the strength of the economic recovery and raising the prospect of a debate among Bank of England officials about whether to raise interest rates.
A five-year squeeze on living standards is coming to an end, providing a boost for Prime Minister David Cameron as he battles opposition claims that ordinary Britons are facing a “cost of living crisis.”
U.K. government bonds rose, with 10-year yields approaching the lowest level since October, as tension in the eastern Donetsk region of Ukraine escalated, boosting demand for the safest fixed-income securities.
Currency traders are more bullish on the pound that at any time in the past three years as the U.K.’s booming property market fuels speculation the Bank of England is getting closer to raising interest rates.