BOE Welcomes Cameron’s Plan to Cut the U.K.’s Budget Deficit, Euro-Zone GDP Advances 0.2%
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EUR/USD – Economic activity in the Euro-zone accelerated 0.2% in the first quarter after holding flat the three months through December to exceed economists’ expectations of 0.1%. The reading shows an improved outlook for the region at the height of the Greek fiscal crisis as the global recovery boosted exports. At the same time, figures showed that the annual GDP rate rose 0.5% after declining 2.2% in the fourth quarter. Meanwhile, GDP in Germany and France added 0.2% and 0.1% respectively from the fourth quarter, while the Greek economy retreated 0.8% in the first quarter. In Spain, Prime Minister Zapatero said that the economy cannot recover without healthy budget, and announced that the 2011 growth will be lower than forecast. To discuss and other topics, please visit the EUR/USD forum.
GBP/USD – Unemployment in the U.K. climbed to a 16 month year high in the first quarter as the International Labor Organization methods rose 53K to 2.51 million. At the same time, the number of people claiming jobless benefits fell 27.1K in April from the previous month, while economists were expecting the reading to fall only 20K. Meanwhile, Bank of England officials said that the economic recovery have increased on the back of investor concern about European budget deficits, and called on David Cameron’s incoming government to step up measures to tackle the U.K.’s shortfall. Officials said while “the recovery in economic activity is likely to gather strength,” downside risks “have increased somewhat, reflecting in particular heightened market concerns about the prospects for fiscal consolidation in a range of countries.” Moreover, Fitch said its “important to see” details in emergency budget and added that “strong, credible” plan needed for U.K. AAA rating. Nevertheless, Cameron has pledged to hold a budget in 50 days to tackle the record U.K. deficit, which would give policy makers greater clarity as they decide how long to keep monetary policy stimulus to support the economic recovery. To discuss and other topics, please visit the EUR/USD forum.
Written by Michael Wright, Currency Analyst
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