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Sterling bounces after BoE survey; UK unemployment rate falls to 2005 low

The U.K. pound surged to a session high on Wednesday morning following better-than-expected jobs data and a business survey from the Bank of England that showed a muted impact from the country's decision to leave the EU.

Sterling climbed to 1.3157 against the U.S. dollar at around 10.00 am London time after trading near 1.308. The update from the country's central bank showed that business uncertainty had "risen markedly " following the EU referendum. However, it said a majority of firms spoken with did not expect a near-term impact from the result on their investment or staff hiring plans.

"As yet, there was no clear evidence of a sharp general slowing in activity," the report on Wednesday stated.

Meanwhile, unemployment in the U.K. nudged lower in the three months to May and hit its lowest level since late 2005, according to new data from the Office for National Statistics.

The jobless rate fell to 4.9 percent, lower than a Reuters estimate for 5.0 percent. Average weekly earnings rose 2.3 percent year-on-year in the three months to May, meeting estimates.

Oli Scarff | Getty Images News | Getty Images

The new job figures from May shed little light on the full impact that the so-called Brexit could have on the U.K. economy.

"We strongly suspect that heightened uncertainty and concerns among businesses following the Brexit vote as well as a weakening economic performance will take an increasing toll on the labor market going forward," Howard Archer, a chief European and U.K. economist at IHS Markit, said in a note.

Anecdotal evidence suggests that some companies are cautious amid expectations that the U.K could see a mild recession by the end of the year. The International Monetary Fund (IMF) said Tuesday that Brexit had "thrown a spanner in the works" of its global growth forecast.

The recent demise of holiday booking company Lowcost Travelgroup has been blamed on the uncertainty ahead of the U.K.'s EU referendum as well as the dramatic fall in sterling following the result.

But there have also been bright spots since Britons went to the polls. German engineering firm Siemens has promised U.K. investment despite an earlier warning over Brexit. Meanwhile, Boeing - the world's largest aircraft maker - chose Britain earlier this month as its home for its new European headquarters. And tech giant SoftBank has promised to invest more and create more jobs at ARM Holding if its recently announced takeover deal proves successful.

However, Archer said he expects the unemployment rate to rise to 5.3 percent by the end of 2016 and to 6.0 percent by the end of 2017.