Positive Jobs Data Fuels Sterling Boost

After three consecutive quarters of contraction, it now seems the UK economy is starting to see genuine signs of recovery. The biggest news yesterday was, obviously, the announcement that unemployment fell by 50,000 to 2.53m in the past three months, taking the jobless rate down to 7.9% from 8.1%, with people in employment reaching a record high of 30 million. Slight suspicion was thrown on the figures by the Labour party, who announced their belief that many of these numbers were caused by people in part-time employment. The total unemployment level also rose in both Scotland and Northern Ireland. However, rising job numbers are generally seen as a sign of a strengthening economy. This caused sterling to recieve a slight boost, bringing the value of sterling vs US dollar to a week long high yesterday. The UK data was also helped by the Bank Of England unanimously voting against any further QE this month, although certain members of the board say it will be necessary in the future. This had led analysts to suspect it may go ahead in November, which will cause weakness for sterling.

In a surprising bit of news, the German government announced yesterday that it had slashed its forecast for economic growth in 2013 from 1.6% to 1%. The German economy minister, Philipp Roesler, stated that Germany is still expected to see economic growth in 2013, therefore there is no concern of an economic crisis in the European economic powerhouse. However, any weakness in Germany, no matter how slight, is generally seen as negative for the entire Eurozone. It remains to be seen how this dramatic downgrade in German growth with effect the value of the euro as a whole. In France, President Francois Hollande has been telling newspapers that an end to the crisis in the eurozone is “very close”. It remains to be seen whether he is simply being optimistic. The euro itself has fallen in value slightly against sterling, probably caused by strong UK data, as well as continuing signs of weakness in the Eurozone.

As with announcements last week, the US economy continues to recieve a boost from the growth in the housing markets. Like in the UK, there has also been positive jobs data in the US, with private sector employment rising greatly over the past year. However, figures on both housing and employment are still much lower than expected, allowing sterling to gain ground, and break away from a week-long drop against the value of the dollar.

Congratulations to the European Union for being awarded the Nobel Peace Prize earlier this week. To nobody’s great surprise, they missed out on the prize for economics. Here at Currency Index, we hope we can provide you with the best rates available should you have any upcoming international payment requirements, so please give one of our brokers a call if you have any transfers to make in the future.