Pound Euro Exchange Rate Lacks Direction as Mixed Labour Figures Bolster BoE Rate Cut Expectations

GBP/EUR Exchange Rate Muted on Mixed UK Jobs Report

The Pound to Euro (GBP/EUR) exchange rate is subdued this morning as traders respond to some mixed jobs data from the UK.

At the time of writing the GBP/EUR exchange rate is trading at around €1.1639, down slightly from the day’s opening levels.

The Pound (GBP) Dented by Weak Wage Growth Figures

The Pound (GBP) is struggling to find support this morning as the UK’s latest employment figures failed to inspire confidence in the UK labour market.

According to data published by the Office for National Statistics (ONS), unemployment in the UK fell from 3.9% back to 3.8% in September, matching the 44-year low stuck through the spring.

However the accompanying wage growth figures were less cheery, revealing that average earnings (including bonuses) slipped from a downwardly revised 3.7% to 3.6% over the same period, the slowest pace of wage growth in four months.

The mixed data is strong signal that the UK labour market is cooling.

A cooling labour market is likely to increase the odds the Bank of England (BoE) will begin cutting interest rates in early 2020, speculation of which is weighing on Sterling sentiment this morning.

Euro (EUR) Steady as Eurozone Economic Sentiment Shows Marked Improvement

The Euro (EUR) is holding its ground this morning thanks to a stronger-than-expected ZEW survey for the Eurozone.

The ZEW economic sentiment index for the Eurozone rocketed up from -23.5 to -1 in November, easily beating expectations it would stumble to -32.5.

This marked improvement in the economic outlook for the bloc appeared to be driven by renewed optimism towards Brexit and US-China trade talks.

ZEW President Achim Wambach, commented:

‘There is growing hope that the international economic policy environment will improve in the near future, which explains the sharp rise in the ZEW Indicator of Economic Sentiment in November.’

GBP/EUR Exchange Rate Forecast: All Eyes on German GDP Figures

Looking ahead, the Pound to Euro (GBP/EUR) exchange rate may trade higher through the latter half of this week, as Germany releases its long awaiting third quarter GDP estimate.

This is widely expected to report that Germany’s economy contracted in Q3, resulting in the Eurozone’s largest economy slipping into a technical recession for the first time since 2013.

As a result we can expect to see the Euro stumble following their release on Thursday.

In the meantime, the UK will publish its latest CPI figures on Wednesday, with an expected dip in inflation likely to undermine the Pound as it puts more pressure on the BoE to begin cutting interest rates.

However this could easily be overshadowed by UK politics, with the Pound likely to rally again if the Conservatives are able to extend their lead in the polls.

Matthew Andrews

Contact Matthew Andrews