UK gilts jump after unemployment rate cheers markets in July

The UK gilts jumped Wednesday after the country’s unemployment rate fell in July while wage inflation registered a weaker-than-expected increase. Further, the Bank of England’s (BoE) monetary policy decision, scheduled to be unveiled on September 13, will add direction to the country’s debt market.

The yield on the benchmark 10-year gilts, fell 1-1/2 basis points to 1.12 percent, the super-long 30-year bond yields also slipped 1-1/2 basis points to 1.77 percent and the yield on the short-term 2-year traded nearly 1 basis point lower at 0.26 percent by 09:05 GMT.

The Office for National Statistics said that the rate of unemployment unexpectedly dropped to 4.3 percent in July, from the previous month’s reading of 4.4 percent. That was its lowest level since 1975. Analysts had expected no change to the jobless rate.

The number of people in work surged 181,000 to 32.1 million in the latest three months, the biggest increase since the end of 2015. Unemployment fell 75,000 to 1.46 million, the steepest drop in two years. Inactivity also declined sharply.

Basic wages rose an annual 2.1 percent in the three months through July, unchanged from the second quarter and below market forecasts, Office for National Statistics figures Wednesday showed. Pay fell 0.4 percent when adjusted for inflation, which is now running just shy of 3 percent.

Meanwhile, the FTSE 100 traded 0.56 percent lower at 7,359.50 by 09:10 GMT, while at 09:00GMT, the FxWirePro's Hourly Pound Strength Index remained neutral at 32.50 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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