The Pound, which dipped against its major rivals this morning prior to influential UK data releases, has extended declines. Sterling slid against the Euro and US Dollar this morning as UK unemployment rose and the Bank of England refrained from altering stimulus.
The Pound Sterling Exchange Rate was in the region of 1.5303 against the US Dollar as of 10:30 am GMT
The latest figures released by the Office for National Statistics showed UK unemployment rising at the fastest pace for over 12 months, with a 70,000 increase in joblessness. Although economists had anticipated no change from the previous quarter, the unemployment rate was up from 7.8 per cent to 7.9 per cent.
As UK economist Vicky Redwood noted: ‘Today’s labour market data provided more evidence that the previous resilience of the jobs market is fading fast. What’s more, the combination of a slowdown in regular pay growth and a drop in bonuses left overall average earnings unchanged on a year ago. More reason, then, to doubt that the pickup in consumer activity since the start of the year can be sustained.’
Meanwhile, minutes from the most recent Bank of England policy meeting told a similar story to last month’s. The vote on whether the BOE should boost bond purchases by 25 billion Pounds was split 6:3 against, with only the central bank’s Governor Mervyn King and two others pushing for additional stimulus. There was little in the minutes to indicate that a change would occur in the immediate future.
Those advocating leaving bond purchases unaltered expressed concerns that additional stimulus could contribute to a weaker pound and worsen inflation expectations.
The minutes stated: ‘the extent to which supply capacity would respond to greater demand would depend on how quickly capital and labour could be redeployed from declining to growing businesses. This issue was better addressed by policies to improve the working of credit markets.’
All nine members of the Monetary Policy Committee voted to hold interest rates at a record low 0.5 per cent.
The policy makers did state that there was the potential to further expand the Funding for Lending Scheme, which is currently having a minimal effect on lending.
The economic outlook presented by the BOE was little changed from February.
After the data release the Pound fell to 86.21 pence per Euro and 1.5303 US Dollars.
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