Pound Euro (GBP/EUR) Exchange Rate Reverses Direction on Strong Eurozone Data
(Updated 15:00, 17/5/22) After hitting a two-week high earlier this morning, the Pound Euro (GBP/EUR) exchange rate then lost most of its gains as strong Eurozone data boosted the single currency.
The Pound (GBP) initially surged higher following a surprisingly upbeat labour market report. The UK unemployment rate unexpectedly fell from 3.8% to 3.7%, while wage growth was also better than forecast.
However, the Eurozone subsequently published its own positive data releases. In particular, the Eurozone GDP growth rates for the first quarter of 2022 beat forecasts.
Quarter-on-quarter growth printed at 0.3%, versus the expected 0.2%, while year-on-year growth came in at 5.1%, versus 5%.
These upbeat results gave the Euro (EUR) a much-needed boost. GBP/EUR slipped from its two-week high of €1.19. It is currently trading at €1.1837, marginally above this morning’s opening levels.
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Pound Euro (GBP/EUR) Exchange Rate Soars following Labour Market Report
The Pound Euro (GBP/EUR) exchange rate strengthened this morning, hitting a two-week high, after UK employment data surprised to the upside.
Meanwhile, the Euro (EUR) is also rising today amid an upbeat mood in European markets. This may be capping GBP/EUR’s upside.
Pound (GBP) Soars as UK Unemployment Falls
The Pound (GBP) surged higher across the board this morning after the UK unemployment rate unexpectedly fell.
Economists had forecast the unemployment rate to hold at 3.8% in March. Instead, it fell to 3.7% – a 48-year low.
This positive data has offered GBP investors a ray of hope as concerns over the UK economy have battered Sterling in recent weeks.
GBP/EUR is now trading at around €1.19, its highest level since the Bank of England (BoE) slashed growth forecasts at the start of May.
Euro (EUR) Firms amid Cheery European Mood
Meanwhile, the Euro (EUR) is also enjoying an upside today, which may be limiting GBP/EUR’s gains.
The Eurozone’s latest GDP growth rate estimates for the first quarter of 2022 beat forecasts. Quarter-on-quarter growth printed at 0.3%, better than the expected 0.2%. Year on year, GDP growth was at 5.1%, rather than the forecast 5%.
Additionally, a bullish mood has swept markets this morning, buoying the Euro.
Pound Euro Exchange Rate Forecast: Could Sterling’s Gains Hit a Roof?
While the unemployment rate is undoubtedly strong, the latest labour market data isn’t all good.
Regular pay continues to lag behind inflation, stoking concerns that the cost-of-living crunch will only worsen. This in turn could further dampen consumer spending, leading to an economic recession in the UK.
In addition, Foreign Secretary Liz Truss is set to announce plans to unilaterally abandon parts of the Northern Ireland protocol.
Analysts believe the move is primarily designed to put pressure on the EU to offer the UK further concessions, and any change in legislation won’t be debated by MPs until later this year.
Still, fears of a UK-EU trade war may pressure GBP today.