Tropical Storm Curtails Gulf Of Mexico Energy Output

Anadarko Petroleum Corp. (APC), BP Plc (BP/) and other oil and natural-gas companies curtailed production in the Gulf of Mexico as a weather system strengthened into Tropical Storm Debby, the fourth named storm of the year.

The U.S. Bureau of Safety and Environmental Enforcement said 7.8 percent of oil production and 8.2 percent of gas output in the Gulf has been halted. Anadarko shut four platforms, and BP started closing some oil and gas wells. Apache Corp. (APA) and two other companies began evacuating non-essential workers from some facilities.

Debby was moving slowly northward as of 5:00 a.m. New York time with maximum sustained winds of 50 miles (80 kilometers) per hour and swells as high as 19 feet (six meters), according to the National Hurricane Center. The storm’s projected path indicated it was heading for the Louisiana coast west of New Orleans and would make landfall as early as Monday afternoon before moving west toward Texas. The storm has a 29 percent chance of intensifying to a hurricane by June 26, according to the forecast.

“We do have it strengthening, and it certainly can’t be ruled out that it will reach hurricane strength, but right now all we’re projecting is a tropical storm,” Dennis Feltgen, a spokesman for the hurricane center in Miami, said in a telephone interview.

Early Evacuations

The Gulf of Mexico is home to 6.5 percent of U.S. gas production, 29 percent of oil output and 40 percent of refining capacity. Offshore oil and gas platforms need to carry out evacuations well in advance of a storm’s arrival, so any system in the Gulf can cause production disruptions.

BP, Apache and Chevron Corp. (CVX) said on their websites that they began withdrawing non-essential personnel from some Gulf facilities yesterday. ConocoPhillips (COP) said it’s taking non- essential employees off its Magnolia platform. BP began shutting some wells as it pulled workers and contractors from offshore platforms and rigs in the expected path of Debby, Brett Clanton, a Houston-based BP spokesman, said in an e-mail.

Anadarko halted production at its Neptune, Independence Hub, Constitution and Marco Polo facilities in the eastern and central Gulf of Mexico, the company said on its website. The company will evacuate all employees from the platforms, it said.

Neptune, Shenzi

BHP Billiton Ltd. (BHP) shut the Neptune and Shenzi platforms, which can together produce 150,000 barrels of oil a day and 100 million cubic feet of gas, on June 22. Murphy Oil Corp. (MUR) began evacuating non-critical workers on the same day, as did Anadarko, Marathon Oil Corp., Nexen Inc. (NXY), Enterprise Products Partners LP and Hess Corp. (HES)

Royal Dutch Shell Plc (RDSA) may remove some non-essential workers from rigs in the central and western Gulf in the next few days, the company said on its website.

ERA Helicopters LLC of St. Charles, Louisiana, reported ferrying workers from offshore platforms. Melanie Landry, a spokeswoman for ERA, declined to comment on which companies had called for evacuations.

Jim Rouiller, senior energy meteorologist at Planalytics Inc. in Berwyn, Pennsylvania, said this is the first real threat of the year in the Gulf of Mexico. With the relatively mild start to summer, he said, “this will get the traders looking and saying, ‘Hey, we got something ominous for the Gulf.’”

Wind shear is pushing most of Debby’s wind speed and thunderstorms to the Gulf’s eastern edge, said Mike Pigott, a senior meteorologist with State College, Pennsylvania-based AccuWeather Inc.

Gain Strength

“As long as it remains over the open, warm waters of the Gulf, it could continue to gain strength,” he said. “If the shear relaxes, it could become a hurricane before reaching Texas.”

A storm gets a name when its winds reach 39 miles (63 kilometers) per hour and becomes a hurricane at 73 miles per hour.

Debby is the fourth storm of the Atlantic hurricane season, which runs from June 1 to Nov. 30. It’s the first time since record-keeping began in 1851 that four storms have formed in the Atlantic before July 1, Feltgen said.

“This is the seventh Atlantic season in recorded history where three storms have formed before July 1,” he said. “We have never gone with four storms before July 1.”

Norway Oil Workers Shut Platforms As Mediation Talks Fail

Norwegian offshore workers shut two platforms after mediated talks on pensions and wages failed, curtailing output in Europe’s second-largest crude and natural gas producer.

A government-led mediation was unable to bridge a divide over pensions with the labor unions, Industry Energy, Safe and Lederene, the Norwegian Oil Industry Association said today in an e-mailed statement. The talks had pushed past a midnight deadline before a strike was called.

“Completely unreasonable pension demands from Industry Energy, SAFE and Lederne show they are clearly placing themselves apart from other workers in Norway,” Jan Hodneland, chief negotiator for the association, said in a statement.

The strike will cut oil and gas output as shut production at Statoil ASA (STL)’s Oseberg and Heidrun fields, and close BP Plc (BP/)’s Skarv development, according to the group. About 700 workers are being taken off the job in the initial phase of conflict, which will also hurt operations at Europe’s biggest methanol plant.

“We can’t accept that the employers rob us of our pensions,” Leif Sande and Hilde-Marit Rysst, leaders at the Industry Energy and Safe unions, said in a separate statement.

The platforms will take four to five days to close, the industry association said. BP’s Skarv output start risks being delayed by the conflict, which will cost 150 million kroner ($25 million) a day in lost revenue, the group said.

Production Affected

The strike by oil-platform workers, which is the first industrywide action since 2004, targets about 165,000 barrels of oil equivalent a day, according to the Industry Energy and Lederne unions. That’s equal to about 3.9 percent of average daily production of oil, natural gas and condensate in Norway this year, according to Bloomberg calculations based on data from the Norwegian Petroleum Directorate.

Oseberg has produced an average of about 194,000 barrels of oil equivalent a day in 2012, while Heidrun’s output has averaged 64,000 barrels, according to NPD data. Skarv is due to start production in the fourth quarter according to BP.

All production will be halted at Heidrun while output from Oseberg will be cut by between 94,000 and 101,000 barrels of oil equivalent, Per Helge Oedegaard, an official with the Lederne union, said on June 18. Output from the 2,500 metric tons-a-day Tjeldbergodden methanol plant will also stop after a single day’s strike because gas supplies would halt, he said. The plant is Europe’s biggest, according to Statoil, which owns more than 80 percent of the facility.

Norway, the world’s third-richest nation per capita, last suffered an oil worker strike in 2006 when oil-service employees disrupted drilling for 34 days. Platform workers last went on strike in 2004, according to the Safe labor union, which is part of the action. The employers are represented by the Oil Industry Association.

Norway produced an average of about 2.01 million barrels of oil, natural gas liquids and condensate a day in May, according to the NPD. That includes average oil output of about 1.633 million barrels.

Egypt Stocks Post Biggest Gain Since February; Abu Dhabi Falls

Egypt’s benchmark stock index rose the most in more than four months before the North African country announced the results of its first free presidential elections. Shares in Abu Dhabi declined.

Orascom Construction Industries, the nation’s biggest publicly traded builder, climbed the most since May and Commercial International Bank Egypt SAE (COMI) rose 3.2 percent. Egypt’s EGX 30 index rallied 3.3 percent, the most since Feb. 13, to 4,166.32 at the 2:30 p.m. close in Cairo. The gauge tumbled 8.8 percent last week. The Bloomberg GCC 200 Index (BGCC200)fell 0.4 percent as Abu Dhabi’s ADX General Index (ADSMI) retreated 1.1 percent, the most since March 7.

Egypt’s shares rose “especially after different political factions announced that they will not resort to violence and will accept the choice of the people,” said Wafik Dawood, director of institutional sales at Cairo-based Mega Investments Securities.

Egypt will announce the results of the presidential vote after the market closes today. The Muslim Brotherhood has denied it plans to resort to violence if their candidate, Mohamed Mursi, doesn’t win the race. The Brotherhood will continue peaceful protests against the military’s move to limit the powers of the next president and increase its influence in the writing of a new constitution, Mursi said at a televised press conference over the weekend.

Still, analysts such as Said Hirsh of London-based Capital Economics say the results may spark unrest if former air force commander Ahmed Shafik is declared winner.

Orascom Construction advanced 2.5 percent, the most since May 13, to 221.5 pounds. Commercial International, the country’s biggest publicly traded lender by assets, rallied to 22.28 Egyptian pounds. About 75 million shares were traded in Egypt today, compared with a 12-month daily average of 86 million.

Oil’s decline

In the Persian Gulf shares retreated after oil declined 5.1 percent last week to $79.76 a barrel, extending losses this year to 19 percent. The six-nation Gulf Cooperation Council, including the United Arab Emirates and Saudi Arabia (SABIC), holds about one-fifth of the world’s proven oil reserves.

“All markets across the region are soft on very light activity,” said Julian Bruce, the Dubai-based director of institutional sales trading at EFG-Hermes Holding SAE. “An air of enhanced caution pervades as we await political developments in both Europe and the region.”

Greece will push its creditors to extend fiscal deadlines under the country’s bailout program by at least two years, according to a policy document drawn up by the three parties in the country’s governing coalition.

Dubai’s DFM General Index (DFMGI) retreated 0.7 percent, while Oman’s MSM30 Index (MSM30) lost 0.2 percent and Qatar’s QE Index (DSM) decreased 0.3 percent. Kuwait’s measure tumbled 1.2 percent and Saudi Arabia’s Tadawul All Share Index (SASEIDX) fell 0.4 percent.

Trading Debut

Tokio Marine Saudi Arabia, a company that offers Shariah- compliant property and casualty insurance, closed at 77.5 riyals on its trading debut in Riyadh.

In Israel, the benchmark TA-25 Index (TA-25) lost 0.8 percent at 3:40 p.m. in Tel Aviv. Protalix BioTherapeutics Inc. (PLX) posted its biggest intraday drop in more than a month, slumping 10 percent to 23.27 shekels, after the European Union rejected the biotechnology company’s first drug on the market. Teva Pharmaceutical Industries Ltd. (TEVA) jumped the most in more than seven years, surging 11 percent to 161.3 shekels, after a U.S. federal district judge ruled that competitors’ drug applications for the multiple sclerosis medicine Copaxone infringe its patent.

The yield on Israel’s 5.5 percent benchmark Mimshal Shiklit government bonds due January 2022 rose two basis points, or 0.02 percentage point, to 4.39 percent.

South African Retailers at Most Expensive Headed for Fall

Investors speculating on rising African wealth are driving South African retailers to the highest valuations on record in a sign to Investec Asset Management and Renaissance Capital the shares are set to fall.
The FTSE/JSE Africa General Retailers Index (JGENR) has jumped 44 percent since Wal-Mart Stores Inc. (WMT) announced plans two years ago to buy Massmart Holdings Ltd. (MSM), South Africa’s largest wholesaler. The gains pushed the 10-member index to 18.1 times reported earnings, 55 percent higher than its 10-year average and above the MSCI Emerging Markets Retail Index (MXEF0RT), which trades at 15.2 times, according to data compiled by Bloomberg. Just eight months ago, valuations on South African retailers were lower than their emerging market peers.

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The FTSE/JSE Africa General Retailers Index has jumped 44 percent since Wal-Mart Stores Inc. announced plans two years ago to buy Massmart Holdings Ltd., South Africa’s largest wholesaler. Photographer: Nadine Hutton/Bloomberg

Investors are “overcooking” valuations on expectations of an African-expansion boost, said Diane Laas, an equity analyst at Cape Town-based Investec Asset Management, which oversees more than $90 billion. “I’m not convinced.”
Retailers including Cape Town-based Shoprite Holdings Ltd. (SHP), Durban, South Africa-based Mr Price Group Ltd. (MPC) and Cape Town- based Truworths (TRU) International Holdings Ltd. plan new stores from Angola to Nigeria to benefit from rising wealth in the world’s poorest continent. Africa’s swelling middle class may boost household spending 63 percent to $1.4 trillion 2020, according to a 2010 report by New York-based McKinsey & Co.

‘Avenue for Growth’

Aberdeen Asset Management Plc, which has 184 billion pounds ($293 billion) in assets, sees further gains for South African retailers. The Aberdeen, Scotland-based money manager has this year raised its stakes in Durban, South Africa-based Spar Group Ltd., Cape Town-based Clicks Group Ltd., Truworths and Massmart, according to data compiled by Bloomberg. Investec Asset Management hasn’t added to its holdings in the stocks, the data show.
“Over time there is an avenue for growth in Africa,” said Gabriel Sacks, an assistant fund manager at Aberdeen in London. “I know that’s a long way away for some of them, but we are long-term shareholders and if anyone will be able to play those markets, we believe its South African corporates.”
Foreign investors own about 70 percent of Truworths, South Africa’s largest clothing retailer, from 67 percent a year ago, and more than 90 percent of Massmart, data compiled by Bloomberg show. Almost 60 percent of shares in Mr Price and 54 percent of Woolworths Holdings Ltd. are owned by foreign funds, increasing from 51 percent for both stocks in May 2011. Aberdeen owns about 12 percent of Truworths and 13 percent of Johannesburg-based Massmart.

Cheaper Than Peers

Some South African retailers are cheaper than emerging- market peers even after the rally. Truworths, trading at 14 times its expected earnings for June 2013, compares with 18 times December 2013 earnings for SACI Falabella, Chile’s largest retailer by market value, data compiled by Bloomberg show. Shares of Lojas Renner SA, Brazil’s biggest listed clothing retailer, are equivalent to 17 times December 2013 earnings, while Massmart is valued at 19 times June 2013 earnings. Aberdeen also owns stock in SACI Falabella (FALAB) and Lojas Renner, the data show.
If the retailers aren’t able to spend their cash on an African expansion or their growth slows, the companies will probably pay out higher dividends, Sacks said in a May 4 interview.

Challenges at Home

South Africa’s economy isn’t growing fast enough for its retail companies to be trading at higher valuations than those in Russia or China, Investec Asset Management’s Laas said in a May 7 interview.
The nine-member MSCI China Retailing Index trades at an average 10 times 2013 earnings, while OAO Magnit, the only retailer on Russia’s Micex Index, trades at 16 times 2013 earnings.
South Africa’s economy expanded 2.9 percent in the fourth quarter compared with 4.5 percent in Chile, 4.8 percent in Russia, 8.1 percent in China and 4.7 percent in Turkey, according to data compiled by Bloomberg. South Africa’s unemployment rate, the highest of 61 nations tracked by Bloomberg, unexpectedly climbed to 25.2 percent in the first quarter, as builders and factories in Africa’s biggest economy shed jobs.

Valuation Reasons

Mr Price, the clothing and linen retailer that trades at 22 times earnings, may fall 23 percent in the next year to 83 rand, according to Jeanine Womersley, a retail analyst at Johannesburg-based Renaissance BJM, who rates the stock hold. The stock fell 1.5 percent to 103.07 rand as of 1:33 p.m. in Johannesburg.
Woolworths, a Cape Town-based food and clothing retailer, may decline 20 percent to 40.60 rand, Shamil Ismail, a Cape Town-based retail analyst at BNP Paribas Cadiz Securities Ltd., who rates the stock a sell, said in a March 30 note. Woolworths slumped 2.9 percent to 48.23 rand in Johannesburg.
“The South African retailers are priced for perfection,” Chris Gilmour, an analyst at Johannesburg-based Absa Investments, said today by phone. “Even so, there are reasons for the valuations. These companies are managed on a par with first-world peers, but at the same time can benefit from emerging-market growth.”
Clicks, Massmart, Woolworths and Mr Price declined to comment on valuations of their stocks, according to e-mailed comment from Woolworths press office and spokesmen Graeme Lillie, Brian Leroni and Lynette Lambert.

Fond Foreigners

Progress in expanding into sub-Saharan Africa is stalled by power shortages, legal and regulatory differences, poor telecommunications and a scarcity of formal retail space such as shopping malls, Truworths Chief Executive Officer Michael Mark said in an e-mailed response to questions on May 11.
Foreign investors are “quite fond of South African retail because of their successful history,” Mark said, adding that local investors see the stocks as expensive. “It depends on your perspective.”
After opening a store in Botswana more than 20 years ago, Truworths has 21 of its 552 outlets outside its home market, including Namibia, Swaziland and Mauritius. South Africa accounts for 98 percent of sales, according to data compiled by Bloomberg.
To mitigate risks, Truworths follows an “incremental expansion plan” which allows the company over time to better understand the operating environment and market potential, Mark said.

‘Next Asia’

Shoprite, Africa’s largest supermarket chain with 1,730 outlets, opened its first store in Namibia in 1990 and has 123 stores in 15 countries outside South Africa that accounted for about 10 percent of fiscal 2011 sales. Shoprite may spend 1.5 billion rand over the next three years On Nigerian property to help build sites.
Mr Price said in 2009 it is looking at Nigeria for an expansion and opened a test store in Ikeja Mall in Lagos in March 2012.
“Retailers are tending to look at Africa as the next Asia and considering enormous growth that could come out of there as it formalizes,” said Jeanine van Zyl, a retail analyst for Cape Town-based Old Mutual Investment Group of South Africa, which manages 472 billion rand from Cape Town. Investors “are pricing in Africa way before it actually happens because Africa is a very slow story,” she said.

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Euro Falls to Four-Month Low as Spain’s Debt Costs Rise

The euro fell to a four-month low as Spain’s borrowing costs rose at an auction, stoking concern that the region’s financial contagion is spreading from Greece.
Europe’s shared currency declined to the weakest in three months versus the yen. The European Central Bank said it will temporarily stop lending to some Greek banks as President Mario Draghi signaled it won’t compromise to keeping Greece in the euro area. The Dollar Index extended its longest string of gains since its inception in 1973 as a report showed U.S. jobless claims for unemployment benefits were unchanged last week before another report forecast to show manufacturing in the Philadelphia region expanded in May.

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Pedestrians pass in front of the European Central Bank's (ECB) headquarters in Frankfurt, Germany. The ECB said in an e-mailed statement yesterday that it will temporarily stop lending to some Greek banks to limit its risk. Photographer: Hannelore Foerster/Bloomberg

 

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May 17 (Bloomberg) -- Geoff Kendrick, head of European currency strategy at Nomura International Plc, talks about the prospect of a Greek exit from the euro and the impact on his foreign-exchange strategy. He speaks with Guy Johnson on Bloomberg Television's "The Pulse." (Source: Bloomberg)

“European tensions are showing few signs of subsiding,” said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. “We’re going to watch the Greek polls over the next couple of weeks. What is worrisome is that the left-wing, anti-European Union party appears to be leading some of the latest polls.”
The euro fell 0.1 percent to $1.2702 at 8:54 a.m. New York time after touching 1.2667, the weakest level since Jan. 17. The shared currency declined 0.3 percent to 101.85 yen. It earlier fell to 101.60 yen, the lowest since Feb. 7. The yen was 0.1 percent stronger at 80.24 per dollar.
Spain’s 10-year yield difference, or spread, over benchmark German bunds widened 10 basis points to 493 basis points and the Stoxx Europe 600 Index (SXXP) dropped 1.1 percent.

Spanish Sale

Spain sold bonds due in January 2015 at an average yield of 4.375 percent, compared with 2.89 percent when they were last auctioned in April. Investors bought bonds maturing in July 2015 at 4.876 percent, compared with 4.037 percent on May 3 and bonds due April 2016 at 5.106 percent.
Borrowing costs in Europe’s most-indebted nations are rising amid speculation that Greece will leave the 17-nation euro area as political parties opposed to the terms of two international bailouts polled strongly in inconclusive May 6 elections. A fresh vote has been set for June 17.
Draghi acknowledged for the first time yesterday that Greece may exit. While the bank’s “strong preference” is that Greece stays in the bloc, the will continue to preserve “the integrity of our balance ECB sheet,” he said in a speech.
“The market is still mainly driven by developments in Europe -- we are going to be in a prolonged period of heightened uncertainty” and euro weakness, said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “Investors are fearful that Europe’s firewalls aren’t enough to protect against contagion. We still favor the more defensive currencies like the yen and the dollar.”

Corrective Snap

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, advanced for a 14th consecutive day, rising 0.2 percent to 81.55.
Jobless claims were unchanged at 370,000 in the week ended May 12, Labor Department figures showed today in Washington. The median forecast of 48 economists surveyed by Bloomberg News called for a drop in claims to 365,000. The Federal Reserve Bank of Philadelphia’s general economic index increased to 10 in May from 8.5 the previous month, economists forecast before today’s report.

Additional Action

Several Fed policy makers said a loss of momentum in growth may warrant more stimulus to keep the recovery on track, according to minutes of the Federal Open Market Committee’s April 24-25 meeting released yesterday in Washington. Central bankers last month affirmed their plan to hold interest rates near zero at least through late 2014 as they sought to push down an unemployment rate that has stayed above 8 percent for more than three years.
The Dollar Index (DXY) may be set for a “corrective snap back,” MacNeil Curry, head of foreign exchange and interest rates technical strategy at Bank of America in New York, wrote in a report yesterday. “However, against 80.38 trend-line support, the larger bull trend remains” and the gauge may see resistance in the 82.59 to 83.36 area, he wrote.
Resistance refers to an area on a price graph where sell orders may be clustered, while support is a level where there may be an accumulation of orders to buy.

China May Surpass India as Biggest Gold Market, WGC Says

Gold demand in China may surge as much as 30 percent this year as rising incomes boost consumption, helping the country topple India as the world’s largest bullion market on an annual basis, according to the World Gold Council.
Demand, which rose to a record in the first quarter, may gain to between 900 metric tons and 1,000 tons this year, from 769.8 tons in 2011, Albert Cheng, Far East managing director at the producer-funded group, said in an interview. Indian usage may drop to 800 tons to 900 tons, from 933.4 tons, he said.

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When gold reached its record Sept. 6, it was moving in tandem with the VIX as Europe’s debt crisis and mounting concern about the U.S. recovery spurred investors to buy the metal to diversify their assets. Photographer: Dhiraj Singh/Bloomberg

 

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May 17 (Bloomberg) -- Nick Holland, chief executive officer of Gold Fields Ltd., talks about gold production and prices. He speaks from Johannesburg with Mark Barton on Bloomberg Television's "Countdown." (Source: Bloomberg)

Higher demand in the world’s largest gold producer may help arrest a slump in prices, which have plunged from last year’s record as investors favored the dollar amid concern Greece may quit the euro. Global gold demand fell 4.6 percent to 1,097.6 tons in the first quarter, the council said in a report today.
“We are confident China will become the largest source of demand for gold this year,” Cheng said in Singapore, restating a council forecast made earlier in 2012. “Over the next two to five years, China and India will go neck to neck and may account for more than 50 percent of world demand.”
Immediate-delivery gold traded at $1,548.19 an ounce at 4:03 p.m. in Singapore. That’s down 1.2 percent this year, and 18.5 percent from the record close on Sept. 5. The price touched $1,526.97 yesterday, the lowest level since December as the Greek debt crisis sent the euro to a four-month low.

‘Seek Cash’

“Investors are selling gold now to seek cash and rebalance their investment portfolio because of concerns about the euro- zone sovereign-debt crisis,” said Cheng, who’s been in the gold industry since 1985. “The fundamental reasons for investing in gold remain very strong, so these investors will return.”
Bullion has rallied for 11 years, gaining through the financial crisis that started in 2008, as investors bought the metal to protect their wealth from currency debasement and inflation. Goldman Sachs Group Inc. (GS) said in a May 9 report the precious metal remains the so-called currency of last resort.
Demand in China totaled 255.2 tons in the three months to March 31 from 232.5 tons a year earlier, the council said in the report. Investment demand gained 13 percent, while jewelry demand increased 7.9 percent to 156.6 tons, making China the world’s largest jewelry market for a third quarter.
The council’s outlook for increased consumption in China this year contrasts with the view from Lao Feng Xiang Co. (900905), the mainland’s biggest gold-jewelry maker, which said this month the country’s demand growth may stagnate in 2012.

‘Increasing Wealth’

“The increasing wealth of the middle class is very important in China,” Cheng said. “In the past 10 to 15 years, it had reached first- and second-tier cities such as Beijing, Shanghai and Hangzhou. We expect such wealth to reach 600 million people in third-tier cities such as Dongguan, Zhuhai, Mianyang and Tangshan.”
In India, demand fell to 207.6 tons in the first quarter, from 290.6 tons a year ago, after the government hiked taxes and import duties, the council said. Investment demand dropped 46 percent and jewelry demand fell 19 percent, it said. A drop in annual demand this year would be the second straight fall.
“Consumers will adjust to the changes over time,” Cheng said, adding that purchases in India are improving this month. “In India, people buy gold for cultural and religious reasons - - that won’t change.”

Pound Falls as UK Economy Threatened by Europe’s Crisis

The Great Britain pound slumped today after the Bank of England trimmed its growth forecast as the crisis in Europe escalates. Positive employment data did not manage to help the weakening currency.
BoE Governor Mervyn King said at today’s press conference that the central bank cut its growth forecast. The Governor explained that the European debt crisis remains a main threat to the UK economy as the eurozone is the main trading partner of the United Kingdom. King stated that it is impossible to estimate results of the worst-possible outcome of the crisis and added:

But even the threat of those more extreme outcomes is enough to affect the outlook for the UK, through its effect on bank funding costs, asset prices, including the exchange rate, and the confidence of households and businesses.

BoE chief was not completely, pessimistic, though and voiced belief that the Great Britain will recover from the current problems.
Employment data showed that King’s optimism may be justified. The unemployment rate unexpectedly fell by 10 basis points to 8.2 percent in the first quarter of 2012 and the number of people claiming Jobseeker’s Allowance provided a pleasant surprise, falling by 13,700 in April from March. Alas, the positive report did not help the pound.
GBP/USD was down from 1.5992 to 1.5915 as of 23:31 GMT, touching 1.5888 today — the low not seen since April 17. GBP/JPY slid from 128.24 to 127.90, reaching 127.65 intraday — the lowest level since April 17. EUR/GBP rose from 0.7956 to 0.7991.