Pound Pauses As UK Jobless Claims Rise Above Forecast

The pound halted previous session's rally versus other major currencies in early European trading on Wednesday following a report showed that the U.K. jobless claims increased more than expected in February.

The Office for National Statistics said in a report that the number of people claiming Jobseeker's Allowance rose by 7,200 from a month ago to 1.61 million in February. Economists had expected only an increase of 5,000. At the same time, the claimant count rate remained unchanged at 5 percent, in line with forecast.

During three months to January, the unemployment rate came in at 8.4 percent of the economically active population, up 0.1 percentage point from the three months to October. It also matched economists' expectations.

Meanwhile, the U.K. government is considering issuing new "super-long" gilts, which will have a maturity of hundred years or more, reports said citing Treasury sources.

In next week's Budget, Chancellor George Osborne is expected to unveil a plan to issue "super-long" bonds which will have a repayment date of 100 years or even longer to help "lock in" the benefits of Britain's historically low interest rates for a very long time, reports said.

European equities rose as the rating agency Fitch upgraded Greece rating to B- from restricted default and the U.S. Federal Reserve upgraded its outlook on the U.S. economy and reiterated its intention to keep interest rates at "exceptionally low levels" until late 2014.

Labor market conditions have improved further in recent months and the unemployment rate is declining gradually, though still elevated, the Fed said after its latest policy meeting.

Thus far, the U.K. FTSE 100 index advanced 0.45 percent, France's CAC-40 index climbed to 0.77 percent and Germany's DAX rose above 1 percent.

The pound that advanced to a 4-week high of 1.4581 against the Swiss franc around 4:15 am ET moved slightly off shortly thereafter. The pound-franc pair is presently hovering at 1.4545 with 1.45 seen as the next likely support level and 1.46 as the probable resistance.

The pound that rose to a new multi-week high of 0.8297 against the euro around 4:30 am ET pulled back to 0.8324 around 6:35 am ET. On the downside, the pound may find target around the 0.8350 level.

The European currency has been trading weak since the Federal Reserve on Tuesday hinted that there is no immediate need for QE3.

Meanwhile, the common currency inched higher after the industrial production in the 17-nation currency bloc rose 0.2 percent month-on-month in January, Eurostat said Wednesday. The increase came in weaker than the expected 0.5 percent rise, but it rebounded from December's 1.1 percent fall.

On a yearly basis, industrial production fell 1.2 percent in January, slower than the 1.8 percent decrease in December. But the annual fall was bigger than 0.8 percent fall forecast by economists.

The pound that touched a 9-month high of 131.37 against the yen around 4:30 am ET erased some of its gains shortly thereafter. The pound-yen pair then traded in a range of 130.80 and 131.15.

The Bank of Japan said that it expects export growth to gain momentum gradually, while industrial production is seen rising moderately going forward. The economy is also expected to gradually emerge from the current flat growth and return to a moderate recovery path as the pace of recovery in overseas economies picks up and reconstruction-related demand strengthens.

The sterling that rose as high as 1.5746 against the dollar around 5:05 am ET erased some of its gains shortly. If the cable weakens further, likely support level is seen around the 1.5650 level.

Dollar jumped on Tuesday's upbeat US retail sales data and the Federal Reserve's fairly positive statement about the economy.

Looking ahead, the US export & import price indexes for February are due out in the North American session.

Federal Reserve Chairman Ben Bernanke is scheduled to speak to the Independent Community Bankers Association conference in Nashville at 9:00 am ET.