Flat Trading for GBP/EUR Exchange Rate as Think Tank Warns of Stagnant Wages in 2018

Pound Sterling Euro Exchange Rate Stuck around Opening Levels as Think Tank Warns Wage Growth will Remain below Price Growth

A leading UK think tank has today warned that real wages are likely to continue falling during 2018, which has weakened the Pound Sterling to Euro (GBP/EUR) exchange rate today.

The Pound Euro currency pairing is currently trending negatively around opening levels at 1.12.

Today’s pay growth warning, from the Resolution Foundation, is weighing on Sterling, as markets remain uneasy over the outlook for the UK’s dominant service sector.

Torsten Bell, Director of the Foundation, explained that ‘while the public have famously defied recent gloomy economic predictions and continued to spend, public expectations do appear to be moving in line with experts’ pessimistic predictions. Over half expect no pay rise next year and households are just as likely to expect their financial situation to get worse as improve next year.’

Focus on Approaching US Data Boosts Euro (EUR) Versus Pound Sterling

Key US consumer confidence data is set for release this afternoon and represents the only high-impact data on the economic calendar today.

This is helping support the Euro; not only because markets are unwilling to buy into the US Dollar ahead of the release, but also because the figures are forecast to show a slight weakening of sentiment.

Also helping to push EUR exchange rates higher is this morning’s Spanish retail sales figures for November, which have greatly beaten forecasts both on the month and on the year.

Monthly sales growth recovered from a -0.8% contraction to grow 1.3% last month, while the pace of annual sales increased from 0.3% to 2% – beating forecasts by 1% and 1.3% respectively.

Pound Losses Versus Euro Contained by Lack of Greek Confidence ahead of Bailout Exit

While the Euro has found some support today, its advance against the Pound is being restrained by news that Greek citizens are not feeling overly confidence as the country nears its exit from its third international bailout.

Greece is due to finish the latest bailout programme in August, theoretically marking the end of seven years of austerity measures, but ordinary Greeks are reluctant to buy into the claims of Alexis Tsipras’ government that the country can exit the programme cleanly.

Less than a fifth (17%) of respondents polled believed the government’s claim that Greece can wean itself off of international financial assistance by issuing new government debt on the bond market.

Over 66% of those asked believed Greek finances would still be subject to some form of international monitoring once the latest bailout programme has been concluded.

Pound Euro Exchange Rate Forecast to Remain Soft as ECB Releases Economic Bulletin

The Pound Sterling to Euro exchange rate is likely to drift lower tomorrow, thanks to the presence of more impactful data on the Eurozone and US data calendars than the UK’s.

While UK mortgage approvals figures are due for release, these could be overshadowed by the European Central Bank’s (ECB) latest Economic Bulletin release.

The forecast for Eurozone monetary policy looks gloomy as of now, but unexpected signs of optimism regarding the inflationary outlook from the ECB could help improve expectations and therefore boost EUR to the detriment of GBP.

The GBP/EUR currency pairing could also come under pressure thanks to the scheduled publication of the US advance goods trade balance for November; as with today’s confidence figures, the approach of this release could deter investors from adjusting their USD positions, allowing the Euro to make gains.

Adam Solomon

Adam joined the team at TorFX soon after graduating from University in 2005 with a degree in Journalism. Since then Adam has advanced to become both Head of Trading and Head of Treasury. His keen interest in the currency market and knowledge of what drives exchange rates makes him perfectly positioned to produce regular market updates focused on the movements of the major currencies.

Contact Adam Solomon