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Pound Euro exchange rate slumps to a 2 month low

Published: 31 Oct at 10 AM Tags: Pound Sterling, Euro Exchange Rate, New Zealand Dollar Exchange Rate, Euro Crisis, UK, Economy, Spain,

The pound fell to a 2 month low against the euro yesterday after the Office for National Statistics (ONS) reported that UK households have seen their living standards stagnate for the past four years and are spending an increasing share of their incomes on "essentials" such as fuel and housing. The ONS says households' true disposable income has flat-lined since 2009 when the recession ended even though national output has expanded by 4.2% over the same period.

In Europe, the European Commission reported yesterday that euro zone confidence has improved right across the board in October with the single exception of sentiment in the services sector. The European Commission did however warn that despite the continuation of the upward trend that began in May, “the magnitude and sectoral scope of the improvement in confidence has moderated compared to recent months”.

Meanwhile, German consumer prices surprisingly fell by 0.2% month-on-month (1.2% year-on-year) rate in October, according to the latest data from the Federal Statistics office.

In addition, the German unemployment rate remained steady in October after hitting a one-year high the previous month with the jobless rate unchanged at 6.9%.

To put into perspective, the average unemployment rate in the euro zone is 12% with countries like Spain and Greece suffering unemployment rates above 25%.

Last night, the Federal Open Market Committee (FOMC) of the Federal Reserve opted to keep its current policy of purchasing $85 billion of fixed income securities per month unchanged.

The policy statement issued by the FOMC reads “Taking into account the extent of federal fiscal retrenchment over the past year, the Committee sees the improvement in economic activity and labour market conditions since it began its asset purchase program as consistent with growing underlying strength in the broader economy. However, the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases".

Overnight, the Reserve Bank of New Zealand kept its benchmark interest rate unchanged at the historic low of 2.5% despite predicting economic growth of at least 3% citing concerns about the global outlook.
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