The euro rose against the pound for the third straight day after another batch of poor UK economic data and some reassuring noises from senior euro zone leaders calmed, at least for the time being, worries about the euro zone sovereign debt crisis.
Data released by the International Labour Organisation showed that the number of people out of work in the UK rose by 80,000 in the three months to July to reach 2.51 million, the biggest quarterly rise in nearly two years. The UK unemployment rate stayed at 7.9% in the three months to July.
Analysts at Barclays Capital Research also saw wage growth as muted and added: “Our longer-term assessment is that the labour market is likely to deteriorate further as private sector employment growth will be insufficient to offset job losses in the public sector.”
Both the pound and the US dollar traded lower against the euro yesterday as nerves about the euro zone sovereign debt crisis were soothed by reassurances from French, German and Greek leaders. Both German Chancellor Angela Merkel and French President Nicolas Sarkozy said they remain committed to helping Greece while Greece said it was confident of meeting obligations needed to avoid a default.
Following yesterday’s meeting between German, French and Greek leaders, this weekend sees a meeting between EU finance ministers and US Treasury Secretary Timothy Geithner.
The gains by the euro came despite ratings agency Fitch issuing a warning that Spain could face a rating cut due to slow economic growth and the failure for regional governments to meet deficit targets.
Fitch has a AA+ rating on Spain with a negative outlook and believes that regional debt places additional pressure on the central government to realise more spending cuts.
Meanwhile, ratings agency peer Standard & Poor’s has an AA rating, while Moody’s has an Aa2 rating for Spain.
The pound fell again against the US dollar and is now trading at an eight month low but remains steady against the high yielding currencies like the Australian dollar as risk sentiment remains negative throughout the financial markets.
Commentary by Tony Redondo
“Any opinions expressed in this document are those of TorFX analysts. Any analysis and/or forecasts provided are aimed at helping clients understand market conditions and developing trends. Clients are wholly responsible for their own trading decisions.”
