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Pound Dives As Unemployment Soars

The pound dropped against its major rivals during morning trade after unemployment rose to the highest in 15 years, adding to the signs of slowing economic recovery. The ILO unemployment rate increased to 8.1% from 7.9% in the three months through August. The number of unemployed in Britain jumped to 2.57 million, with jobless claims adding 17.5K people in September, making it seventh consecutive increase. Youth unemployment climbed to a 991,000, the highest since the records started in 1992, pushing the youth jobless rate at 21.3%. The government is facing troubles avoiding the recession as it has pledged to maintain the biggest fiscal squeeze since the World War II, while the Bank of England policy makers restarted their quantitative easing program last week. The NIESR (National Institute of Economic and Social Research) said yesterday the recovery is the weakest Britain has seen in almost a century as the economy has barely expanded over the past year. Expect for the pound to remain bearish against its rivals as economy falters and additional asset purchase program is pushing the inflation up.

Pound Drops Before Industrial And Manufacturing Gauge

The pound is higher against the dollar but dropped against the euro during the overnight trade ahead of the industrial and manufacturing production release today at 9:30. The manufacturing gauge is expected to show further signs of contraction, with the expectations for the factory output to drop by –0.2% in August from previous month. Industrial output, which includes mining, oil and gas, is also expected to contract by –0.2% in August. Overnight, the BRC retail sales monitor showed retail sales growth picked up in September, with total sales increasing by 2.5% from 1.5% previously. Separately, the September RICS (Royal Institution of Chartered Surveyors) survey showed that house prices continue to fall, reporting a net price balance at –23%, and activity remains subdued. Expect for the pound to remain driven by today’s economic releases, as weaker that expected output would add to signs the nation’s economic recovery is faltering. 

The euro is higher against most of its major rivals as German and French leaders agreed to deliver plan to support banks in order to avoid expansion of sovereign debt crisis in the region. In addition, Slovakian lawmakers are voting today on the expansion of the emergency bailout fund (EFSF) as they are the only country that hasn’t ratified the financial rescue measure. Expect the single currency to remain supported against its major rivals as German and French leaders pledged to deliver a rescue plan by the Group of 20 meeting on November 3.

The dollar consolidated across the board during the Asian session as global stocks advanced and investors came out of the safety of the US currency. The greenback sentiment was also dented against the euro and the Swiss franc before the Federal Reserve releases minutes of its September meeting tomorrow. The Fed said last month it will buy 400 billion dollars of bonds with maturities of six to 30 years through June while selling an equal amount of debt maturing in three years or less under a program that has been called “Operation Twist”. Looking ahead to today, monthly budget statement and NFIB Small Business Optimism headline the economic calendar.

Euro Up As EU Leaders Pledge To Recapitalize The Banks

The pound remained flat against the euro but gained against the dollar during the overnight trade as investors speculate Eurozone can control its debt crisis, dumping demand for haven currencies. Sterling regained 1.5% against the dollar as better than expected employment data from US and optimistic reports from the Eurozone spurred optimism across the markets. Looking to the Britain’s docket for the week ahead, employment figures headline the economic calendar with the expectations for the jobless claims to have increased by 24K in September. The ILO unemployment rate is also expected to tick one notch up to 8.0% in August, adding to the signs of weakening economic recovery. Also scheduled for this week are the industrial and manufacturing production figures for August, with the projections for the numbers to deteriorate further. The Bank of England policymakers decided to leave base rate unchanged at 0.5% on their October meeting, but opted for the additional 75 billion pounds expansion of its current quantitative easing program. The central bank pledged to complete the new round of purchases in four months and said that slowing global growth and the turmoil in Europe “threaten the UK recovery”.

The euro gained against most of its major rivals after French and German leaders pledged to create a plan to recapitalize banks and confirmed their intentions to keep Greece in euro. French President, Nicolas Sarkozy, said yesterday that European leaders would deliver a plan for Greece at the Group of 20 meeting on November 3. German Chancellor Angela Merkel stated that EU leaders will do “everything necessary” to ensure bank have enough capital to endure the region’s debt crisis. Looking to the week ahead, the major event is the Greek repayment of its upcoming debt on Friday.  Market participants will pay close attention on Greek repayment as any failure in this could lead to country’s default. Also scheduled for this week are the German inflation numbers and Eurozone Industrial Production figures. Expect for the euro to remain under pressure as debt crisis continue to undermine the region.

Dollar Consolidates Before Employment Figures Release

The pound is mixed this morning, gaining against the broadly weaker dollar, but consolidating against the euro after the Monetary Policy Committee (MPC) announced 75 billion pounds expansion of its asset purchase program at yesterday’s meeting. The decision came as a surprise as majority of the market participants expected for the central bank to make the move at November meeting. Bank of England did not change its policy rate stance, with base interest rate remaining at record low of 0.5%. With this move UK policymakers clearly stated that they are prioritizing the recovery over the threat from the inflation as ongoing debt turmoil in the Eurozone threatens to knock down country’s economic growth. Looking ahead to today, the Producer Price Index (PPI) headlines the economic calendar, with the expectations for the input prices to have increased by 1.2% while output prices have rose only 0.2%.

The euro gained against most of its major rivals during the overnight trade after the European Central Bank said yesterday it will reintroduce unlimited one year loans to banks and resume with purchases of covered bonds to encourage lending. The ECB announced however, that it had decided to leave interest rates unchanged at 1.5%. Today in the Eurozone, the German Industrial Production headline the economic calendar, with market consensus calling for a –2.0% contraction in August, placing the year on year figure at 6.4%. Expect for the single currency to remain in current levels for the reminder of the week as EU leaders discuss how to avoid Greek default.

The dollar consolidated during the Asian session as stocks around the globe advanced before US make public its September employment figures. Analysts expect for the world’s largest economy to add 55,000 jobs in September after no change in August. Nevertheless, the amount of people adding jobs is not expected to be sufficient enough to change overall unemployment from 9.1%. Expect for the greenback to experience excessive volatility ahead of today’s non-farm payrolls release.

Pound Flat Before BoE Meeting

The pound remained relatively flat against the euro and the dollar ahead of the Bank of England’s policy announcement today at noon. The Monetary Policy Committee is expected to leave its key rate unchanged at 0.5% and the stock of asset purchases fixed at 200 billion pounds, although some economists speculate possible increase in QE by 50 billion pounds. Yesterday’s data revealed that UK’s economy grew less than expected in the second quarter of 2011, expanding only by 0.1%, missing the 0.2% reading previously published by ONS (Office for National Statistics). The BoE came under pressure to expand its QE program to help revive the ailing economy, but is facing obstacles as government applies its austerity measures to tighten country’s swelling deficit. Expect for the pound to weaken against its major rivals should we see central bank announcing further monetary stimulus.

The euro climbed against most of its major rivals during early morning session as gain in European stocks boosted demand for the single region currency. Stocks soared today before German Chancellor Angela Merkel meets with the heads of the IMF and the World Bank as they discuss a coordinated capital injection in order to maintain the euro stability. Also scheduled for today is the European Central Bank monthly meeting. It is broadly expected for the ECB to leave its base rate unchanged at 1.5% and not to announce any additional fiscal measures. However, as European debt crisis has intensified and spread throughout the region some economists are calling for the ECB to cut its benchmark rate by at least quarter of a point. Today’s meting will be the last chaired by President Jean Claude Trichet before he hands the presidency to Italy’s Mario Draghi on November1.

Euro Drops Versus Dollar As Moody's Downgrade Italy’s Debt Rating

The pound dropped against most of its major rivals during Asian session on speculation the Bank of England may resort to more quantitative easing in near future. Sterling came under pressure yesterday after PMI construction index dropped to 50.1 in September from 52.6 in August, making it the lowest reading in 2011. Weak economic recovery and growing debt problems within the Eurozone are denting pound’s sentiment and some analyst believe more quantitative easing may be needed as early as this weak. Overnight, the BRC Shop price index for September showed shop price inflation remained steady at 2.7%, demonstrating that inflationary pressures remain concentrated in specific areas. Looking ahead to today, services PMI headlines the economic calendar, with the expectations for the figure to consolidate to 50.5 in September compared with 51.1 in August. As services gauge is authoritative indicator of domestic activity, a weaker number could prove to be the prevailing point for additional QE this week rather than waiting until November. In addition, Office for National Statistic will publish its second quarter GDP final estimate today, with the expectations for the figure to remain unchanged at 0.2%. Expect for the pound to remain volatile ahead of the BoE’s monthly meeting on Thursday.

The euro dropped against the dollar during the overnight trade after Moody’s Investor Service downgraded Italy’s credit rating, adding to the signs European Central Bank will boost monetary stimulus at its meeting tomorrow. The single region currency dived during yesterday’s late night session as Moody’s lowered Italian debt ranking to A2 from Aa2, citing concern that government will struggle to reduce its debt amid weak economic growth. Rating agency also stated that European countries with below the top Aaa level may see their rankings lowered. Looking to the day ahead, Eurozone Retail Sales figures and PMI Services headline the economic calendar. Expect for the single currency to remain under pressure against major rivals as European economy is faltering.

Pound Drops Versus Dollar As Construction PMI Disappoints

The pound is mixed this morning, consolidating against the broadly stronger dollar, but reaching six-month high against the euro on growing concern that European debt crisis will spread throughout the region. EU finance ministers meeting in Luxemburg considered expanding the July deal for Greece from 50 billion euro to a 159 billion euro rescue package. Eurozone governments signaled yesterday that bondholders may have to consider taking bigger loses on Greek sovereign debt in order to contain the crisis. On the other hand, sterling was undermined against the dollar this morning as PMI Construction release for September edged down to 50.1 from 52.6 in August, dropping more than analysts anticipated. Bank of England policymakers said in their last meeting that it is becoming increasingly probable for another round of asset purchase program in order to support the economic recovery. Expect for the pound to experience an excessive volatility ahead of the BoE’s monthly meeting scheduled for this Thursday. 

Euro Dives Before EU Officials Meet Today To Discuss Debt Crisis

The pound gained more than one percent against the broadly weaker euro, but consolidated against the dollar before the report that is predicted to show manufacturing shrank for the eight consecutive months in September. The PMI gauge is expected to have dropped to 48.5 from 49 in August, which is not particularly positive reading given that any level below 50 indicates contraction. Also scheduled for today is the Bank of England’s publication of the Record of the Interim Financial Policy Committee held on 20 September. Looking to the week ahead, key event will be the BoE’s monthly meeting on Thursday, with the expectations for the MPC to discuss about the expansion of the quantitative easing program. Although there is a reasonable chance for the expansion of the asset purchase program, market consensus is projecting the policy rate to be unchanged at 0.5% and the QE to remain at 200 billion pounds. Also scheduled for this week is the PMI Construction data on Tuesday and PMI Services on Wednesday. Both figures are expected to consolidate slightly as British economy is expected to show further signs of economic slowdown. The week will end with PPI inflation data for September, with the projections for both input and output figures to have increased from previous month. 

The euro dropped across the board during the overnight session before the Eurozone finance ministers gather today to discuss the threat of Geek default. Many economists believe that Europe must raise the amount of funds it has allocated to contain the fiscal crisis and they have to do it sooner rather than later. Greek government said yesterday it approved 6.6 billion euro of austerity measures designed to help secure a rescue-loan payout and second EU bailout funds. Also scheduled for today is the Eurozone PMI Manufacturing data, with the expectations for the figures to deteriorate further adding to the signs of weakening economic picture in the region. Looking to the weak ahead major release is the ECB monthly meeting, with the expectations for the central bank to react or give an outlook regarding the recent developments on the debt crisis. Expect for the single currency to remain driven by the events regarding the fiscal crisis as investor start to shift their attention towards Italy and Spain.   

The dollar is higher against most of its major rivals during Asian session as global stocks continue to dive and Eurozone debt crisis deepens, giving the investors limited options for maneuver. Greenback gains in recent months show that investors confidence in the US currency remains high, regardless of the country’s recent downgrade by the S&P rating agency. Looking ahead to this week, September non-farm payrolls highlight the economic calendar, with the expectations for the 56K new jobs to be created in September.