U.K. Jobless Claims Hits Seven-Year High, Unemployment Rate Rises to 2.7%
U.K. Jobless Claims Hits Seven-Year High, Unemployment Rate Rises to 2.7%
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GBPUSD - Jobless claims in the U.K. increased 36.5K to 980,900 in October to reach its highest level since 2001, while last month’s reading was revised higher to 36.3K from an initial reading of 31.8K. In addition, the ILO unemployment rate ticked higher to 2.7% from 2.6% in August as firms continued to cutback on employment as Europe’s second largest economy heads into a recession. Fading employment opportunities paired with slowing demands from the global economy has raised fears that the U.K. could face a deep and prolong recession, which could lead the Bank of England to lower borrowing costs even further to avoid a severe downturn. Meanwhile, the Bank of England lowered their growth forecast for the next year, and expects price pressures to fall below the central bank’s 2% target for inflation over the next two years as economic activity falters. The dovish commentary by the MPC suggests that they will continue to aggressively lower the benchmark interest over the coming months, which would only stoke increased selling pressures for the pound in the near-term.
EURUSD - Industrial production in the Euro-Zone fell 1.6% in September as fading demands from home and abroad pushed firms to lower outputs. The breakdown of the report showed that production in Germany plunged 3.7% from the previous month, followed by a 2.1% decline in Italy. The data suggests that economic activity may weaken further over the coming months as the Euro-Zone teeters on the brink of a recession, which could lead the European Central Bank to increase their efforts to stave off further downturns in the economy. Mounting growth concerns has led President Trichet to push inflationary concerns to the backburner, and is likely to lower the benchmark interest rate at the December 4th meeting as fears of a global meltdown intensify.
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