The main events yesterday were the UK unemployment figures, which we will look at today. First let’s have a quick look at where rates stand right now:
Market Snapshot @ 08:30am:
- GBPEUR 1.1625
- GBPUSD 1.6385
- GBPNZD 2.5557
- GBPAUD 2.0509
- GBPCAD 1.8320
- GBPCHF 1.7626
- GBPZAR 13.327
First at 09:30am yesterday, we saw the number of people claiming unemployment benefit increased by 23,800 in June to 1.56 million, which was actually less than analysts had forecast.
As the figures were better than expected, we saw a slight surge in the pound, pushing GBP/EUR up to around 1.1685.
The rise was short lived however, when the Office for National Statistics released further data that showed UK unemployment rose by a record 281,000 to 2.38 million in the three months to May. This means that the jobless rate has now increased to 7.6%, the highest in more than 10 years.
TUC general secretary Brendan Barber said “It’s particularly worrying that over half a million unemployed people have been out of work for at least a year, including 133,000 young unemployed people.”
With a new generation of school and college leavers soon starting to look for work, our unemployment crisis will no doubt get even bigger, with most analysts forecasting the level will break well over the 3 million mark.
Even though economic conditions may be stabilising, economists expect unemployment to continue rising this year, as financial uncertainty persists.
Very Strange Figures
The claimant count measure of unemployment in June posted its smallest rise in a year.
However, the wider ILO measure posted its biggest rise on record. Of the different figures released, it is the internationally recognised ILO figure of 2.38 million that is the government’s preferred measure for unemployment, because it is a more comprehensive indicator of the job market.
So, in the same day we had figures showing the smallest rise in a year, while at the same time figures showed the biggest rise on record ?!
The Chartered Institute of Personnel and Development has called for an enquiry into this conundrum of the differing figures. Either way, the markets have taken the news negatively for the pound, and Sterling continues to struggle against major currencies including the EUR and USD. With a lack of any economic data today, it’s confidence that will be the driver for exchange rates today.
So, what next for the pound?
We still think that rates in the medium to long term will continue to rise and GBPEUR will break well through 1.20 later this year. In the short term however, we could well see problems for the pound as poor figures dent confidence that the worst of the recession is over.
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We have nothing at all for the EU or UK today, with most data coming from the US:
US – Jobless Claims
US – Philly Fed Survey
Swiss – ZEW Survey
We also have total net TIC flows from the US. TIC stands for Treasury International Capital. It shows in and out flows of financial resources in the United States. The TIC flows is one of the major events in the market, as it is seen by most participants as the Government resource for offsetting the current Trade Deficit.
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