Falling Unemployment Boosts Pound

After a dubious start to the month, in which the Pound plummeted from €1.23780 to €1.19169 in 10 days, the last couple of days has seen a slight increase in the strength of Sterling. Newly released figures suggest part of this recovery may be down to rates of unemployment, which fell by nearly 21,000 in June; not quite as big a drop as we saw in May, but another very positive step for the UK economy. The rate of unemployment has now fallen to 7.8% – drop of 0.2% since April, which has helped boost the Euro/Pound exchange rate to €1.2010. However, expert are warning us not to get our hopes us too soon, as the government’s spending cuts are yet to take their toll on UK industry.

The falling rate of unemployment is a positive reflection of UK industry; employers hiring new staff suggests a recovering economy, encourage foreign investors and boosting the Pound. However, with massive spending cuts just around the corner, nobody can be certain of the impact these will have on both the labour force and the exchange rate. What is for certain is that UK industries will have to save money wherever they can and we may very well see job losses and a drop in the strength of the Pound as a result.