Pound Drops After UK Unemployment Rise Unexpectedly

The pound dropped against its major rivals after UK Unemployment figures surprised on the downside adding to the signs of worsening economic outlook. The report showed that UK unemployment rate in June reached 7.9%, exceeding the market expectations of 7.7%, and pushing the total unemployed number to 2.49 million. Jobless benefit claims rose by 37,100 from June to 1.56 million, making it the biggest increase since 2009. The figures suggest that labour market is weakening as the Eurozone debt crisis threatens global growth. Separately, the Bank of England Minutes showed that all nine MPC members voted to hold the key rate at record low 0.5%. This was the first unanimous decision since May 2010 as the economic recovery showed further signs of deterioration. Regarding the asset purchase programme, Adam Posen was the only policy member to vote for increase by 50 billion pounds to a total of 250 billion. However, sterling drop against the euro was limited as leaders of Germany and France rejected plans for joint-bond plan and expansion of the 440 billion euro rescue fund. They proposed for Eurozone governments to put the debit limits into the national law and the “euro council” to be established as a part of a planned “economic government” for Europe. Looking ahead to today Eurozone inflation figures and US producer prices index headline the economic calendar. 

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