The euro came within two cents of a five-week low after European Commission President Jose Barroso said the eurozone is confronting a “truly systemic crisis.” Word that the European Central Bank was buying up Spanish and Italian debt helped to reverse that fall, however. The pound fell as well on bad economic news out of Britain.
Bloomberg reported Wednesday that Barroso told the European Parliament that Europe’s economic recovery has stalled. He added that without economic growth in Europe there was “no way out of the crisis.”
Derek Halpenny, European head of currency research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, said of the joint currency’s weakness, "Each day that goes by the situation is getting worse, and it’s inevitable under those circumstances that the currency comes under pressure. There’s unbelievably difficult decisions that lie ahead for Europe in terms of resolving this crisis.” The ECB’s purchases of Italian debt were larger than usual, according to unidentified sources familiar with the transactions.
One factor in the fall of the pound was news on British unemployment, which rose by 129,000 to 2.62 million, the biggest increase since 2009, according to the Office for National Statistics. The jobless rate climbed to a 15-year high of 8.3 percent. The number of unemployment-benefit claims rose 5,300 to 1.6 million in October.
Another was the statement by Bank of England Gov. Mervyn King that Britain is in for a “markedly weaker” economic growth outlook, as well as effects from the European debt crisis. Policy makers also signaled they may need to expand stimulus further.
King was quoted saying upon presentation of the quarterly inflation report, “Despite the easier monetary stance, growth over the next few quarters is likely to be markedly weaker than in the August projection” and may be “broadly flat” in the first half of 2012. “There is no meaningful way to quantify the most extreme outcomes associated with developments in the euro area.”