GBP EUR Exchange Rate Forecasted To Head Lower Despite Record Greek Unemployment Figure

Published: Friday, 11 January 2013 09:00 BST - Written by Frank Davies

STORY LINK GBP EUR Exchange Rate Forecasted To Head Lower Despite Record Greek Unemployment Figure

Japan’s recently-elected Prime Minister Shinzo Abe issued a statement of intent last night when his new government announced that it will be injecting a mammoth 10.3 trillion Yen of new credit into the nation’s ailing economy in an attempt to spur domestic economic growth. Japan’s policymakers have estimated that the package, which amounts to the equivalent of £72bn, will increase the nation’s economic growth by 2% during 2013.

The news confirms Abe’s status as a ‘man of action’ and played well with Japan’s equities market during the overnight session – the country’s benchmark domestic share index, the Nikkei 225, gained 1.40% on the day, a fact which is indicative of the identity of the likely beneficiaries of the newly minted Yen. Other neighbouring nations appeared less convinced regarding the wisdom of Japan’s actions – Tokyo’s Hang Seng lost almost 0.5% on the session, whilst Sydney’s ASX dropped by around a quarter of a percentage point. If Sydney and Hong Kong’s losses are mirrored in Europe and North America later today, then the US Dollar could hoover up a renewed bout of safe haven support, which could potentially send the Pound US Dollar exchange rate (currency : GBP USD) back down towards the 1.6000 level.

Elsewhere, yesterday’s Greek labour market data told a sorry story – the overall level of unemployment in the debt-addled Hellenic state currently stands at a whopping 26.8%. This represents the highest overall level of joblessness which any nation state has registered during the euro era and is illustrative of the ravaging effect which the harsh EU/ECB/IMF austerity measures of recent years are having on the troubled country. In a clear example of ‘buy on the rumour, sell on the news’, the euro made pronounced gains against Sterling yesterday in spite of the shocking Greek data, sending the Pound Euro exchange rate down towards the mid-1.21s. A break to a new 8 month low looks likely for the pair sooner rather than later.

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