Pound Euro Exchange Rate Holds at Two-Month High on Robust UK Wage Figures

GBP/EUR Exchange Rate Steady as UK Employment Data Impresses

The Pound to Euro (GBP/EUR) exchange rate appears to be consolidating Monday’s gains this morning as markets react to the UK’s latest labour report.

At the time of writing the GBP/EUR exchange rate is trading at around €1.165, virtually unchanged this morning and leaving the pairing just shy of a two-month high.

Robust Wage Growth Supports Pound (GBP)

The Pound (GBP) is trading steadily this morning as investors welcome the publication of the UK’s latest jobs report.

Data published by the Office for National Statistics (ONS), revealed  unemployment unexpectedly fell back to 3.8% in July, returning to the 44-year low previously held between March and May.

David Freeman, head of Labour Market statistics at the ONS, commented:

‘The employment rate has remained fairly constant at a joint record high for some months now, while the unemployment rate was last lower at the end of 1974.’

However it was the accompanying data on earning’s which was in focus for GBP investors this morning as wage growth (including bonuses) shot up to 4%.

This saw wages in the UK accelerate at their fastest pace since June 2008 and should support the Bank of England (BoE) leaving rates on hold as policymakers await more clarity on Brexit.

Euro (EUR) Muted Ahead of ECB Decision

The Euro (EUR) continues to trade in a narrow range this morning as investors hold their positions in the single currency ahead of the European Central Bank’s (ECB) rate decision later in the week.

The bank has signalled that markets can expect the announcement of a ‘substantial’ stimulus package this week, but questions remain on what this may contain.

Economists suggest the measures are likely to include a rate cut and a pledge to keep rates low for an extended period.

On top of this the ECB is also expected to restart its quantitative easing programme.

GBP/EUR Exchange Rate Forecast: How Might the Euro React to ECB Stimulus?

Looking ahead, the ECB’s rate decision on Thursday looks set to dominate movement in the Pound to Euro (GBP/EUR) exchange rate this week.

Analysts suggest any moves by the back are already largely priced in, but given the uncertainty that still surrounds its stimulus package, there is a strong risk of a dovish surprise sending the Euro lower.

While parliament is suspended for the next five weeks, GBP investors are still likely to be kept on their toes by political headlines.

This includes the potential for more resignations among Johnson’s ministers, as well as any headlines resulting from the party conferences being held over the next couple of weeks.

Then there is of course also the looming threat of a general election, which looks to be almost inevitable at this point and is sure to inject fresh volatility into Sterling.

Matthew Andrews

Contact Matthew Andrews