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Sterling drops against US dollar due to UK unemployment rate

Published:  16 December, 2010

Sterling fell to a 12 day low against the US dollar yesterday after UK jobs data came in much weaker than expected.

Sterling fell to a 12 day low against the US dollar yesterday after UK jobs data came in much weaker than expected.


Smart Currency Daily Rates

EURO/GBP - 1.1756

US$/GBP - 1.5577
- 1.5060
- 1.5643
- 1.5746
- 10.6527
- 130.95
- 12.1140
- 2.1101
- 10.6551
- 1.3252

Many felt that this drop points towards a shaky recovery in the coming months, and with uncertainty over the impact of a 2.5% VAT hike and austerity measures, many investors pulled out of sterling positions. Despite figures from the Confederation of British Industry that showed retail sales had grown at the fastest pace for 8 years, the markets focused on data that showed that the number of Britons out of work rose for the first time in half a year with the unemployment rate hitting 7.9%. Out later today, there is retail sales data and the Bank of England's Adam Posen speaks to the Institute of Directors.

In the Euro zone, the euro came under renewed pressure yesterday as worries persisted over the debt crisis in the region. The euro fell by 0.9% against the US dollar to hit a low of $1.3250/ €1after US credit rating agency Moody's announced that it had put Spain's Aa1 credit rating on review citing mounting debt and 2011 borrowing requirement. Today sees the start of the EU Economic summit, which is likely to be watched closely to find some sort of direction and long term plan to deal with the European debt crisis.

In the USA, the US dollar started the day strongly after receiving a boost from data that showed a steady recovery in New York State's manufacturing sector. Month on month consumer price inflation came in at 0.1% against an expectation of 0.2% which further supported the Federal Reserve's recent move to pump an additional $600bn into the US economy to kick start the flagging recovery. Today we have further manufacturing data and US weekly unemployment claims.

Elsewhere, China and the USA have agreed to improve cooperation on issues ranging from trade to investment and finance. There has been a potential currency war brewing between the two countries over China's use of a fixed exchange rate that artificially keeps Chinese goods cheap - much to the anger of many Americans who want to see manufacturing recover in the USA. This marks a first step to resolving these concerns.

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