Pound Euro Exchange Rate (GBP EUR) Remains Under Pressure Following Cut In 2013 UK Growth Forecast By The IMF

Published: Thursday, 24 January 2013 14:00 BST - Written by Toni Johnson

STORY LINK Pound Euro Exchange Rate (GBP EUR) Remains Under Pressure Following Cut In 2013 UK Growth Forecast By The IMF

Big hitters in the world of global finance don’t come much bigger than the Chief Economist at the International Monetary Fund, so the markets sat up and took notice when the current incumbent of the role at the IMF, Olivier Blanchard, gave his verdict on the UK economy earlier.

Blanchard offered his advice to British Chancellor of the Exchequer George Osborne ahead of Osborne’s key note speech at the Davos economic forum, suggesting that the harsh austerity measures which have been introduced in Britain since the current coalition government came to power in the middle part of 2010 are failing to have the desired effect.

The IMF trimmed its 2013 GDP growth forecast for the UK economy from its autumn estimate of 1.1% to 1.0% earlier on, and Blanchard used this as evidence that Britain’s policymakers should slow down the rate of tax hikes and government spending cuts which they are implementing.

Elsewhere, this morning’s session brought the release of another shocking piece of data from Spain’s floundering economy. Official government figures revealed that very nearly 6m Spaniards remain without a job, but perhaps more shockingly, 55.13% of 16-24 year old Spanish workers are unemployed.

Up to this point, institutional investors have chosen to set aside the worrying Spanish labour market data and have instead concentrated on the UK’s fiscal position. This has sent the Pound Euro exchange rate (currency : GBP EUR) rate down as low as 1.1862 on the day.

Meanwhile, there was better news from China overnight, with the release of the latest HSBC Flash PMI Manufacturing Sector Survey, which revealed that factory output in Asia’s leading economy is expanding at its fastest rate since the early part of 2011. The Chinese data has prompted a generally positive session for global share markets, suggesting healthy levels of appetite for risk which could cause the safe-haven US Dollar to weaken as the day progresses.

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