Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 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