UK unemployment reaches a 17-year high but Sterling remains firm

Yesterday's UK employment figures had little impact on Sterling, principally because the data was mixed. Whilst the rate of unemployment hit a 17-year high in November at 8.4%, up from 8.3% in October, the number of people on jobseeker's allowance grew by only 8,000 which was less than than had been expected. Whilst the employment data was in no way a good sign for the UK, Sterling recovered from the initial drop when the headline rise in unemployment broke, but by the close it was well on the way to recovery.

Of bigger concern to the UK is the International Monetary Fund's latest plan. If it goes ahead, the IMF is going to increase the size of its kitty from $400 billion to $1 trillion, presumably with at least one eye on the EU's failure to boost its own stability fund. The proportional nature of the IMF's funding would mean a contribution from Britain of between £15 billion and £17.5 billion.

When the IMF announcement came out yesterday morning it gave an immediate boost to confidence across financial markets. Among currencies, the Euro was the main beneficiary and the Japanese Yen the biggest loser with the US Dollar close on its heels. Sterling was all over the place before eventually settling close to its earlier position, just a dozen ticks lower against the Euro on the day.

In the US, factory gate prices and international investment flows into the US were vaguely positive. Perhaps the most surprising data came overnight; New Zealand's consumer price index fell by -0.3% in the fourth quarter, scuppering any chance of an early interest rate increase and sending the NZ Dollar one cent lower against Sterling straight away.

In Australia, the Australian employment data revealed a loss of 29,300 jobs in December against expectations for an increase of 10,200 jobs. Bizarrely, the overall unemployment rate actually fell to 5.2% from 5.3% despite the loss of jobs although this has been attributed to lower participation levels. The news saw the Australian Dollar fall on the news but it has recovered slightly as the UK markets open.

There is no important UK or Eurozone data today but there is enough data from the US to move the market. US inflation, housing starts, jobless claims and the Philadelphia Fed's manufacturing index.

As well as the data, investors will be paying attention to negotiations surrounding "voluntary" rescheduling of Greek debt. Successful negotiations would be good for the Euro and overall market confidence; failure would be awful for the Euro but it will likely drag Sterling into the mire too.