Pound Euro Exchange Rate Struggles: GBP Falls despite UK Unemployment Drop in February

GBP/EUR Exchange Rate Dips as UK Joblessness Crisis Weighs on Pound

The Pound Euro exchange rate has fallen by -0.2% so far today despite the UK unemployment rate for February unexpectedly dropping to 4.9%. The pairing is currently trading around €1.15.

Sterling has suffered from signs that the UK is suffering from a jobless crisis despite the unemployment rate falling for the second month in a row. GBP has however suffered from a fall in the number of employees on payrolls falling by 56,000 between February and March.

Darren Morgan, the Director of Economic Statistics at the Office for National Statistics (ONS), commented on the data:

‘The latest figures suggest that the jobs market has been broadly stable in recent months after the major shock of last spring. The number of people on payroll fell slightly in March after a few months of growth.’

Meanwhile, job vacancies have showed signs of stalling, with the figure now much lower than before the pandemic.

The ONS comments:

‘The increase in vacancies over the latest quarter was 17,000, which is a six-month consecutive slowdown in the quarterly figures from the 165,000 increase seen in September 2020.’

However, UK markets are becoming more confident about the outlook for the economy, with Covid-19 daily deaths and hospitalisations continuing to fall.

As a result, we could see the Pound Euro exchange rate quickly recover its losses as optimism grows in the British economy as non-essential shops, pubs and restaurants have now reopened.

Euro (EUR) Rises on US Dollar Weakness

The Euro (EUR) rose today as the European Union’s (EU) vaccination programme is showing signs of speeding up.

Joshua Livestro, member of the Committee on European Integration of the Advisory Council on International Affairs of the Dutch Foreign Ministry, commented:

‘With all the shots rolling in, it’s even no longer unthinkable that the EU will finish vaccinating its entire adult population ahead of the UK.’

Consequently, single currency traders are becoming increasingly more hopeful about the Eurozone’s economic recovery in the next few months.

The Euro (EUR) has also benefited from its negative-correlation with eh US Dollar, which has suffered due to increasing upbeat global trade.

As a result, the EUR/GBP exchange rate has risen on renewed market appetite for the single currency as demand for the safe-haven US Dollar has slipped.

Pound Euro Exchange Rate Forecast: Could US Dollar Weakness Boost the Single Currency?

Pound (GBP) traders will be looking ahead to tomorrow’s speech from the Bank of England’s (BoE) Governor Andrew Bailey.

Any further upbeat commentary about the state of the British economy would be GBP-positive.

GBP investors will also be awaiting tomorrow’s publication of the UK Consumer Price index for March.

If this shows a return of strength in the UK economy, then the GBP/EUR exchange rate would head higher.

The Pound Euro (GBP/EUR) exchange rate could continue to suffer, however, if US Dollar weakness continues to provide a boost for the single currency.

David Moore

Contact David Moore