* UK jobs data drive sterling higher
* Australian dollar jumps as inflation pares rate-cut risk
* Yen briefly blips higher after BOJ stands pat as expected
* Bank of Canada meets after rough month for Canadian dollar
By Patrick Graham
LONDON, Jan 22 Sterling and the Australian
dollar both surged on Wednesday after data releases that spoke
for a tighter approach to monetary policy despite doubts over
the solidity of growth in both economies.
UK unemployment slid to within a whisker of the level at
which the Bank of England has said it might consider a rise in
interest rates, driving sterling - the best performing major
currency of the past six months - another half a percent higher
against both the euro and dollar.
The largest quarterly rise in inflation in over two years
meanwhile put paid to expectations of further cuts in rates in
Australia and helped the Aussie gain almost 1 percent, all but
erasing this year's losses.
Regardless of another warning by the UK central bank that it
is in no hurry to raise rates which have been at rock bottom
since 2008, the jobless figures added to a growth picture that
is far brighter than most of mainland Europe.
"In essence what we have is a developing picture of
disinflationary growth which is improving the return on
sterling," said Peter Kinsella, currency strategist at
Commerzbank in London.
"Euro-sterling has broken through some pretty important
barriers and I think it (the pound) will continue to outperform
While there are more doubts about the UK currency's ability
to progress against the dollar, a break above $1.6540 also left
this year's highs around $1.66 in question.
"(An attempt on) 1.66 is entirely possible but unlikely to
be sustained," Kinsella said.
There was also some help in morning trade for the euro in
the form of heavy bids for a Spanish debt sale, helping the
single currency recover to trade steady at $1.3554.
The Aussie had stolen the spotlight in early trade, rallying
against its U.S. counterpart after an unexpected spike in
inflation led investors to cut back bets on another interest
The Australian and Canadian dollars are seen weakening in
2014 despite an improving global economy, with their prospects
likely to be tied more closely to shifts in monetary policy at
home than demand for their commodity exports.
But a number of analysts said the inflation numbers hinted
that the Australian central bank's next move might be to raise
rather than cut rates.
"The market had been pricing in a 30-40 percent change of
more cuts in rates and that has really been ruled out," said
Michael Sneyd, strategist with BNP Paribas in London. "There may
even now be scope for the market to think about the RBA hiking
Most of the action in major currencies this year has come
from outside the big three of the dollar, yen and euro in the
absence of much new direction on monetary policy by their
respective central banks.
The BOJ clung to its upbeat consumer inflation forecasts on
Wednesday, encouraged by signs of a broadening recovery that may
nudge firms into spending more on wages and investment.