Sterling jumped and the FTSE share index fell briefly this morning as employment data came in better-than-expected and the Bank of England revealed that not all members had backed a pledge to keep interest rates low for a prolonged period.
One member of the Bank's nine-strong monetary policy committee, Martin Weale, supported in principle the use of forward guidance in monetary policy, but disagreed with the time horizon of one of the "knockout" clauses that would sever the link of an interest rate hike to unemployment.
The point in contention was the clause that, if the committee thinks inflation will be 0.5 percentage points or more higher than its two per cent target in 18 to 24 months' time, the MPC would not necessarily raise rates, even if unemployment falls below seven per cent. Weale thought that this time period was too long.
Meanwhile, the Office for National Statistics revealed that the unemployment rate remained flat at 7.8 per cent in the second quarter, but that the number of people claiming unemployment benefits - a key indicator of future unemployment - dropped off by a greater-than-expected 22,900.
The pound jumped 0.35 per cent to $1.55 after the data were released, but shortly erased some of these gains. The euro briefly rose against the pound on the back of strong economic recovery in France and Germany, but gains were more than offset by events in the UK.
The FTSE fell 0.44 per cent to 6,583 before returning to growth.
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