GBP/EUR Exchange Rate Weakens Following UK Employment Figures
The Pound to Euro (GBP/EUR) exchange rate is back on the defensive this morning, in the wake of some mixed employment figures from the UK.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1004, down roughly 0.3% from this morning’s opening levels.
Pound (GBP) Retreats on Employment Concerns
The Pound (GBP) is trending lower against the Euro (EUR) and majority of its other peers this morning, in response to a mixed UK jobs report.
On the positive front was the latest employment figures, which revealed the fall in UK payrolls during the coronavirus crisis has been less than feared.
This was evident in the latest jobless figures published by the Office for National Statistics (ONS), which revealed the unemployment rate held at 3.9% in May, defying forecasts it would climb to 4.2%.
76.4% of people aged 16 to 64 were in paid work in March to May 2020. The unemployment rate was 3.9% , and the 16-64 economic inactivity rate (those who were neither working nor looking for work) was 20.4% https://t.co/X0gj4iKmeA pic.twitter.com/1AXvNjAxzF
— Office for National Statistics (ONS) (@ONS) July 16, 2020
However, analysts warn these better-than-expected figures mask the real story, that unemployment is set to skyrocket as the UK government winds down its furlough scheme.
James Smith, Developed Markets Economist at ING, comments:
‘Unfortunately, amid an increasing number of public job-related announcements, there’s little doubt that unemployment will rise over the coming months.
‘The gradual unwinding of the job retention scheme over the summer is being seen as a potential catalyst for firms to begin making changes, and the jury is out on how far the new government bonus scheme will cushion the blow.’
Also limiting any upside in Sterling this morning were the accompanying earnings figures which revealed wage growth tumbled from 1% to –0.3% in May, likely hurting future consumer spending and further dampening hopes for a V-shaped recovery.
Euro (EUR) Muted ahead of ECB Rate Decision
At the same time, the Euro (EUR) is struggling to find momentum this morning as EUR investors await the European Central Bank’s (ECB) policy decision later this afternoon.
After topping up its Pandemic Emergency Purchase Program (PEPP) with an additional €600bn in June, the ECB is widely expected to leave its monetary policy untouched this month.
Instead, ECB President Christine Lagarde is likely to use her statement to once again urge EU leaders to support the ECB through fiscal stimulus, ahead of tomorrow’s EU summit.
GBP/EUR Exchange Rate Forecast: All Eyes on EU Summit
Looking ahead, the spotlight at the end of this week’s session will undoubtedly be on the latest EU summit of leaders.
Tomorrow’s summit will be the first face-to-face meeting since the start of the coronavirus crisis, but more importantly will see leaders discuss the EU’s €750bn coronavirus recovery fund.
This could infuse some notable volatility into the Pound to Euro (GBP/EUR) exchange rate at the end of the session as opposition by the so called ‘frugal four’ – Austria, the Netherlands, Denmark and Sweden- could derail any agreement.
The Pound, meanwhile, may face some renewed pressure through the latter half of the week, if the latest round of Brexit negotiations failed to lead to a breakthrough.