Foreign Exchange: Pound Falls Further Against The Euro

Published: 19 May 2011 By MoneyHighStreet Staff Leave a Comment
Updated: 19 May 2011

The Pound fell further yesterday against the Euro, falling under 1.1350, following reports showing that unemployment claims rose in April at the fastest rate since January 2010.

Foreign ExchangeThis report on jobless numbers adds to the worry that the economic recovery is at a fragile state, particularly considering that the government’s austerity measures have not yet been fully implemented.

Unemployment claims increased by 12,400 to 1.47 million last month, albeit the level of unemployment fell to 2.46 million people in the quarter through March.

This rate is likely to rise further over the coming months, which will impact on manufacturing output and particularly services sector growth through consumer spending.

The Pound didn’t receive any benefit from the Bank of England MPC minutes either. They showed that majority warned that raising rates at this stage of the recovery could weigh on consumer spending even more and risk another slump.

Andrew Sentance maintained his recommendation for a 50 basis point increase, but his term on the MPC will end this month and his replacement is not expected to take the same line which makes more unlikely that there will be a Base Rate rise in the near term.

The Bank of England’s chief economist Spencer Dale and Martin Weale also voted to raise interest rates by 25 basis points this month. The other five members voted for no change.

It’s also been recently reported that UK inflation last month rose at the fastest pace since 2008, standing at 4.5%. The Bank’s quarterly inflation report showed that inflation will probably exceed 5% over the coming months, as commodity price rises and a weaker Pound raise import costs.

The Pound remained lower against the US Dollar too, trading as low as 1.6133 this the course of the day.

It also continued down against the Euro overnight and lost ground against the majority of the 16 most actively traded currencies, after a report from the Nationwide Building Society showed that UK consumer confidence fell in April.

EUR/USD

The Euro rallied against the US Dollar for a fourth consecutive day yesterday, rising to a high just above 1.4280.

There were no US economic reports of note yesterday but further speculation that the Federal Reserve will keep interest rates at ultra low levels this year continues to undermine the US currency.

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Any analysis and/or forecasts are provided to help understand market conditions and developing trends. Readers are wholly responsible for their own trading decisions.

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