UK Unemployment…Eurozone to Blame: 16th November, Forex Trading Update

Nov. 17, 2011 - PRLog -- Every day Forex trading dealer Vantage FX (http://www.vantagefx.co.uk/) provides an overview of the news activity and announcements set to shape currency movements in the near future. Jay Mawji, the company’s head of market analysis, takes a look at UK unemployment on 16th November 2011.

“UK unemployment continued to rise as the economy struggled with low levels of growth and contagion from the Eurozone, whilst the Eurozone powerhouses clashed over what role the ECB should play in economic action to stabilise the region, particularly with Eurozone growth grinding to a halt.

Jobless allowances in the UK rose to 8.3%, which equates to 1.6million people in the UK out of work and claiming job seekers allowance. Although this figure was expected, growth in the UK has been slow and lay-offs in the public sector have not been usurped by private sector employment, placing further pressures on the UK government and the Bank of England. There were hints in the BoE inflation report that further Quantitative Easing will be introduced to deal with the economy and capitalise on the likelihood that inflation will fall significantly into 2012. The UK government has shifted the blame of UK unemployment on the Eurozone crisis, claiming contagion has knocked deep into our economy. However, not all accepted this view, with the Government cuts in public spending being blamed for the spiralling unemployment. There is no doubt we will want to protect the UK deficit, avoiding us being dragged closer to the Eurozone; however, the UK population is paying an expensive price. Ultimately, for the UK to grow we need to drive down inflation, attack unemployment and engage in effective pro-growth stimulus.

France and Germany have inevitably clashed over the handling of the Eurozone affairs. With Growth slowing, unemployment rising and difficulties in leadership within Eurozone countries, the path forward is difficult to follow. France is under pressure from rating agencies, who are eyeing their AAA credit rating, whilst bond yields continue to rise, which is forcing the cost of borrowing and repaying of debt upwards. Sarkozy is calling for the ECB to play a greater role in the handling of the economy and urging for the ECB to push forward with pro-growth strategies and stimulus. On the other hand, Merkel is struggling with keeping her power in the German government. Merkel is tied down by the German parliament, which has restricted her rights to authorise the ECB to carry out affairs at their discretion. The ECB seems keen to stay as uninvolved as possible, rejecting international pressures to intervene in the Eurozone, as they prefer for Eurozone governments to pursue austerity measures and reforms to solve the debt crisis.

Surely we can find a solution to all this...”

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