Figures just released by the Office for National Statistics show that UK unemployment fell by 20 000 in the three month period to August but the number of people out of work for longer than a year has risen to its highest total in 13 years. The drop takes the rate down from 7.8 to 7.7%, and means that 2.45 million people are currently unemployed.
The news is mirrored in the USA and clients buying Dollars from GBP are enjoying the best rates seen since March 2010. However this USD weakness is adding strength to the Euro meaning clients looking to buy the single currency would do well to speak to a broker to ensure they are protected from further adverse movements.
Pound Sterling – UK Markets
There has been much concern that the UK government’s austerity measures will lead to higher levels of unemployment as the cuts bite. Accountants PwC have estimated that the national belt tightening could cost as many as 500 000 jobs within the private sector. Similarly, a gloomy prediction by the chief economist at HIS Global Insight suggests that UK unemployment will peak at 2.85 million (9%) in the first half of 2012 before recovering. Unfortunately, recruitment always lags behind economic recovery, but it will pick up once the economy enjoys sustained growth and confidence returns.
UK consumer confidence fell in September with the Nationwide index down from 62 to 53, its lowest since March last year.
At yesterday’s close, the Pound was trading at €1.1348 and had shed 0.9% of its value against the single European currency. However, the Pound regained some strength in out of (European) hours trading and currently, £1 is worth €1.1367 (at 07:16 GMT).
US Dollar – US Markets
In America, further data should be released today on the initial jobless count (i.e. people claiming benefit for the first time) and the continuing jobless count (i.e. longer term unemployment). The figures are likely to give a further indication of the extent of the slowdown in the US economy.
Figures will also be released to show the state of the US trade balance for September later today.
The Dollar managed to stay fairly flat against the Yen in European trading yesterday, but lost ground against GBP breaking a psychological barrier . The current value of the Dollar against Sterling is $1.6037 (at 09:45 GMT).
Euro – European Markets
The Euro has pushed above the $1.40 mark for the first time since February 2010 and is currently trading at $1.4114 (at 08:16 GMT). The rise in the value of the Euro has more to do with the weakness of the American economy than any inherent strength on this side of the Atlantic.
Data will be released tomorrow by the European Union which will report on the consumer price index for September and the trade balance for August. There is a suggestion that the strengthening Euro may start to have an impact on European exports which are becoming relatively more expensive. However, the weakness of the Euro in the spring (because of the sovereign debt crisis) may be regarded as an aberratio.
Other Currencies – Highlights
In a move that surprised analysts, the Bank of Korea’s monetary policy committee decided to maintain interest rates at 2.25% where they have stood since coming off a record low of 2% in July. The record low level was held for 17 months as part of a response to the global financial crisis. Analysts had anticipated that the rate would rise to 2.5%, but the committee felt that the risks of heightened volatility in foreign exchange markets and economic activity generally meant that the time was not right to raise the cost of borrowing in Asia’s fourth largest economy.
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