Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24
Micro Strategy Bubble Mania - 10th May 24
Biden's Bureau of Labor Statistics is Cooking Jobs Reports - 10th May 24
Bitcoin Price Swings Analysis - 9th May 24
Could Chinese Gold Be the Straw That Breaks the Dollar's Back? - 9th May 24
The Federal Reserve Is Broke! - 9th May 24
The Elliott Wave Crash Course - 9th May 24
Psychologically Prepared for Bitcoin Bull Market Bubble MANIA Rug Pull Corrections 2024 - 8th May 24
Why You Should Pay Attention to This Time-Tested Stock Market Indicator Now - 8th May 24
Copper: The India Factor - 8th May 24
Gold 2008 and 2022 All Over Again? Stocks, USDX - 8th May 24
Holocaust Survivor States Israel is Like Nazi Germany, The Fourth Reich - 8th May 24
Fourth Reich Invades Rafah Concentration Camp To Kill Palestinian Children - 8th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

GBP/EUR The Currency Pair to Watch for in 2014?

Currencies / British Pound Jan 12, 2014 - 06:03 AM GMT

By: Submissions

Currencies

Liron Levy writes: It is crystal clear that employment is the economic sector that appears to drive the currency exchange market.  No country or economic zone is today boasting that they are out of the woods as to the 2008 global recession.  However, the GBP is benefiting from current figures that continue to confirm a strong ongoing improvement in the employment sector.  The jobs picture in the UK exhibits falling unemployment, along with a seventh consecutive month of healthy increases in hiring. 


The primary sectors covered in Markit’s Purchasing Managers Index (PMI) are comprised of employment, manufacturing, construction and services.  In the UK, manufacturing output registered a slightly larger drop than predicted.  The third quarter 2013 Manufacturing PMI recorded 58.1, the peak since 2010.  That score dropped to 57.3 for the fourth quarter.  The sunnier side of the British manufacturing photo, however, shows new orders reaching a 21-year high, coupled with a rise in new jobs that tops the charts when reviewing the past 2.5 years. 

The GBP and the EUR

Bolstering the forex investment in the upward movement of GBP/EUR, is the intimation by the Bank of England (BoE) that once the ongoing drop in unemployment brings that indicator to a threshold of 7.0%, the global community can expect to see a rise in rates.

Viewing the Construction section of the PMI, we see a sector that has come out stronger in the fourth quarter than was previously forecast.  The expectation was a drop to 62.0 from the third quarter 62.2.  The reality was a midpoint level of 62.1 by the year’s end.

As is often the case, the PMI presented a three-dimensional configuration of the financial outlook for the U.K.  A huge portion, 70% in fact, of the GDP of Britain is ensconced in the service sector.  The fourth quarter brought this major sector to 58.8, the lowest reading since July 2013.  At least 60.0 was expected.  In spite of the surprising dip in the service sector, the elevated level of the GBP has continued unabated, as investors look to the solid 5.3% improvement in the GBP over the entirety of 2013.

Inflationary Fears Put the Skids On

The picture of the British monetary framework must include a look at inflation.  The rise in the wage structure is not keeping pace with inflation, though individual spending remains alive and well.  The strength of the Gross Domestic Product is dependent upon the inclination to spend.  Economists who are optimistic as to the sustained economic revival of the U.K., expect an increase in wages to result from a corporate growth-oriented outlook. 

Gaining a perspective as to the economic situation of continental Europe, the pervading view is one of a monetary zone that continues to struggle.  The price-rise indicator of financial health was a dismal one-month drop from 0.9% to 0.7%.  Deflation, translated as a decrease in overall retail prices, is avoided like the plague by each country.  Accompanying this drop from November to the close of December is a rise in the regional debt of Europe.  The result of this duality is a statement by the European Central Bank that interest rates, currently at their lowest record of 0.25%, may drop even lower.

It is the establishment of new jobs, chasing a seven-year high, that ultimately carries the day, as the GBP/EUR currently continues to register over 1.20.  Additionally, the prediction of a higher rate by the BoE as unemployment falls, coupled with the negative data emanating from Europe, create a solid GBP/EUR performance. It’s looking solid for the sterling, and forecasts certainly point in that direction.      

This article was contributed by www.cfd.co.uk
Cfd.co.uk is a leading UK financial website that reviews and compares top UK CFD brokers.

Copyright © 2014 Liron Levy - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in