The UK labour market defied the recession as the unemployment rate fell to 8.1% in the three months to May, a nine month low. The number in work grew by 181,000 making this the second consecutive month of good news. The Olympics will have provided a temporary boost to employment but with low productivity and weak demand, the risk of a rise in unemployment remains.
The minutes of the July UK Monetary Policy Committee meeting showed voting was split 7-2 in favour of the £50bn QE extension. All members thought the economic outlook had deteriorated enough to warrant further stimulus but two members thought the recently announced measures to boost credit may be sufficient.
The euro came under pressure after German Chancellor Merkel said that authorities have not yet “shaped the European project in a way that we can be sure that everything will turn out well”. On the back of this news, Sterling rose to €1.2773 but GBP/USD dropped to a low of $1.5580 following the BoE minutes before rising back over $1.5650.
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