EX: Pound Dollar Exchange Rate Fresh Lows; Pound Sterling To Euro Also Falls One-month Low
The Pound Dollar exchange rate (GBP/USD) plunged to new lows around 1.5220 yesterday, while the Pound Euro exchange rate (GBP/EUR) continued to weaken, falling to the lowest level in a month, ahead of the Bank of England minutes and unemployment data. There was a stronger-than-expected headline figure for the UK claimant count with a decline of 7,000 for the month, following a revised 5.300 decline the previous month. There was, however, an increase in the ILO unemployment rate to 7.9%, from 7.8% in February.
There was also a further slowdown in the rate of earnings growth to 0.8%, which maintained fears over the outlook for consumer spending, as real incomes continue to decline. The Bank of England minutes recorded another 6-3 vote in favour of leaving the amount of quantitative easing on hold at the April meeting with Mervyn King again voting for a further expansion to the plan. The underlying tone surrounding the minutes was relatively unchanged, but there was still speculation that the BoE would push for additional easing before King’s departure in July, as the incoming Governor Mark Carney has expressed a desire to move away from QE. There were also no significant references to the Pound in the minutes, which encouraged speculation that the MPC was happy with a slow decline in the exchange rate. The focus this morning will be on the latest retail sales figures for March and a weak result will put the Pound under further pressure.
The Euro attempted to push higher against the U.S Dollar on Wednesday but struggled to move north of 1.32 and retreated through the course of the day. There was a sharp decline in the German DAX index with some rumours circulating of a German sovereign downgrade, which caused some immediate Euro selling. The Euro was also undermined by comments from former ECB member Bini-Smaghi, who stated that the ECB needed to find a way to resist Euro gains. Elsewhere, there was also comments from Bundesbank President Weidmann, who warned that the period of Euro crisis could extend to 10-years.
