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Foreign Exchange Rates - Pound to Dollar GBP USD Sterling Euro EUR Picks Up Following UK Employment Figures

April 14, 2011 - Written by John Cameron

The Pound Euro exchange rate (GBP EUR) is 1.1321. The Pound Dollar exchange rate (GBP USD) is 1.6301.

Sterling found some support in the markets yesterday, following its sharp downward move after Tuesday’s lower-than-expected CPI inflation figure, with the GBP/EUR rate picking up from a low of 1.1205 at yesterday’s European open to trade above the 1.1300 level earlier today.

Yesterday’s support for the Pound was caused by a largely positive set of UK employment figures which were released during at the start of the morning session. The data showed that the headline UK unemployment figure dropped by 17,000 in the three months preceding the end of February. This was the first drop in the level of UK unemployment since last Autumn. However, the media picked up on the fact that more than one in five of UK 16-24 year olds are now unemployed - this represents almost one million young people, prompting commentary about Britain’s ’lost generation’.

Elsewhere, Japanese policy makers yesterday moved to downgrade Japan’s growth forecast for the remainder of the year. The latest estimates are that the total re-building cost following last month’s massive earthquake and Tsunami may be as high as $295bn. The Japanese government’s gloomy economic outlook report followed the IMF’s downgrading of their own Japanese growth estimate on Monday. Both the IMF and Japanese government agree that March’s natural disaster is likely to hit exports and domestic industrial output particularly hard.

The negative economic outlook report follows an upgrading of the severity rating of the Fukushima nuclear crisis to a maximum of seven earlier in the week. This makes Fukushima only the second ever nuclear incident to warrant a ‘seven’ rating - the other was the infamous Chernobyl disaster in 1986. With the stricken Japanese nuclear plant continuing to emit radiation, the Japanese government has warned that radio-active leaks could surpass those of Chernobyl, making Fukushima the world’s worst ever incident of nuclear contamination.

The GBP/USD rate traded down to 1.6237 yesterday, but if Japan shows signs of slipping into an economic slump, or if the situation in Fukushima deteriorates, then the US Dollar may make gain significant safe-haven support, with 1.6000 being its near-term target.

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