Pound Euro Exchange Rate Drops In Spite Of Positive UK Employment Data

Modified: Wednesday, 12 December 2012 19:20 BST - Written by Minesh Chaudhari

STORY LINK Pound Euro Exchange Rate Drops In Spite Of Positive UK Employment Data

On the face of it, this morning’s session in the currency markets should have been a positive one for Sterling. The latest UK unemployment figures provided grounds for optimism that Britain’s beleaguered economy may at last be showing signs that it has turned a corner. The Office of National Statistics revealed that the overall level of joblessness in the UK economy had dropped by 82,000 in the three months to the end of September. This represented the largest three-month drop in UK unemployment for some 11 years.

Meanwhile, the Bank of England’s Governor-in-waiting, current Bank of Canada Governor Mark Carney, used a speech earlier today to reveal a revolutionary proposal. Carney suggested that global central banks should consider dropping their inflation targets and instead focus on achieving inflation-adjusted GDP targets. The idea behind this is that with ultra-low interest rates in almost all developed global economies, current inflation-based targets have become redundant. What the populace of recession-hit states demand is a return to pre-recession levels of economic activity. The underlying message in Carney’s words was that he will be pushing for ‘go for growth’ economic policies when he takes over at Threadneedle Street early next year.


Other things being equal, analysts would expect these two developments to trigger a sustained bout of support for the Pound. The fact that the GBP EUR exchange rate has lost around a quarter of a percentage point on the day so far to trade at 1.2371 suggests that institutional investors have other ideas. The Pound has also struggled to register gains against other major currencies including the New Zealand Dollar and Swiss Franc on the day. However, the GBP USD exchange rate has risen to 1.6148 ahead of this afternoon’s Federal Reserve FOMC policy decision.

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