Pound Euro Exchange Rate Strikes 22-Month High As Eurozone Unemployment Hits Record High

Published: Thursday, 3 May 2012 09:00 BST - Written by James Fuller

STORY LINK Pound Euro Exchange Rate Strikes 22-Month High As Eurozone Unemployment Hits Record High

The evidence is mounting that the eurozone’s sovereign debt problems are starting to have a pronounced adverse effect on the continental European economy. A slew of disappointing European data releases yesterday morning added to this feeling, as firstly German unemployment figures and then last month’s whole-of-eurozone PMI Manufacturing sector survey came out significantly worse than had been expected.

However, the killer blow came with the release of March’s eurozone unemployment figures during the middle part of the European morning session; the key labour market release showed that joblessness in the region had rocketed to 10.9%, its highest level since records began. It appears that widespread government spending cuts and tax hikes in an attempt to balance the collective books of debt-addled eurozone states are causing European consumers to stop spending, hitting Europe’s economy hard. This saw the GBP EUR exchange rate to trade up to 1.2327, its highest level for over 22 months.

Elsewhere, there was further cause for optimism for the US real economy, as US Factory Order data for March came in at a better than expected -1.5%. However, all was not rosy in the States, as the ADP Employment Change number for last month printed at 119,000 versus expectations of 170,000. This figure often provides a relatively accurate ‘heads up’ on the key US Non-Farm Payroll figure. This month’s NFP edition is set for release on Friday, and if it does indeed show that less than the anticipated 165,000 new jobs were created in the non-farming sectors of the US economy last month, then the Greenback could come in for sustained safe-haven support in the lead-up to this week’s market close at 2200hrs BST on Friday.

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