Euro, British Pound Lag as Data Indicates Economies Far From Recovery
Both the euro and the British pound fell against the US dollar on Tuesday as economic data highlighted how far from recovery the Euro-zone and UK remain. Germany’s Federal Labor Agency said that unemployment levels rose by 31,000 in June to 3.5 million, the highest since 2007, while the jobless rate rose to 8.3 percent from 8.2 percent, suggesting that consumption is likely to fall in the Euro-zone’s biggest economy in coming months. Meanwhile, Eurostat’s initial estimates showed that Euro-zone CPI fell to -0.1 percent in June from a year earlier. While the European Central Bank (ECB) has said in the past that they expect inflation to fall negative mid-year, the actual results may keep concerns alive that deflation is a clear and present risk for the region.
The British pound was hit especially hard on news that the Office for National Statistics revised their UK GDP readings down to -2.4 percent for the first three months of the year, matching the Q3 1979 low. Even worse, the year-over-year rate of GDP growth was revised all the way day to -4.9 percent, which is the lowest since recordkeeping began in 1956. The results leave GDP at the lower end of the Bank of England’s past projections, and suggest that the central bank's forecasts were perhaps somewhat optimistic. Furthermore, if development continue to turn more dour, the central bank may start considering an expansion of their quantitative easing program.
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