Pound climbs as benefits drop

Foreign currency exchange prospects looked strong for sterling as the pound rose sharply against the euro on Wednesday (16th December).

The exchange rate reached a high of 1.126 euros to the pound whilst rates against the dollar also showed a slow improvement.

This unexpected rise in sterling coincides with the release of official figures showing a surprising drop in the number of claimants for unemployment benefits in the UK.

Gavin Friend, a currency strategist at nabCapital, told Reuters: "Not many people expected to see that number and, however you argue it, the trend does suggest that the UK is moving towards positive figures for unemployment".

UK finance minister Alistair Darling said the unemployment figures were "very encouraging" but added that the government's focus must now be to work with the Bank of England on exiting from the central bank's quantitative easing policy.

The number of claimants fell last month 6,300, leaving the total numbers at 1.63 million.

November's fall in unemployment benefits is the first since February 2008.

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Posted by Anna Jackson