Pound Euro (GBP/EUR) Exchange Rate Climbs as UK Wages Grow Despite High Inflation

Pound Euro (GBP/EUR) Exchange Rate Climbs amid Signs of Persistent UK Wage Growth

(Updated 16:35 15/11/22)

The Pound Euro (GBP/EUR) exchange rate has gained positive momentum over the course of the day. The earlier UK employment data bolstered the currency pair as markets priced in further interest rate hikes from the Bank of England (BoE).

A risk-on impulse also helped to bolster the exchange rate. Fresh missile attacks on Kyiv by Russian forces also weakened demand for the Euro (EUR), limiting losses for the pair.

At time of writing the GBP/EUR exchange rate was at around €1.1451, which was up roughly 0.6% from this morning’s opening figures.

Original article continues below:

Pound Euro (GBP/EUR) Exchange Rate Trends Sideways after Mixed UK Employment Data

The Pound Euro (GBP/EUR) exchange rate is trading within a narrow range today. The currency pair may be being underpinned by today’s UK employment data. Average wages including bonuses rose despite severe inflationary pressures.

On the other hand, gains for GBP/EUR are likely being capped by bets on further interest rate hikes from the European Central Bank (ECB). Some upbeat data releases for the Eurozone could also be weighing on the exchange rate today.

At time of writing the GBP/EUR exchange rate was at around €1.1393, which is virtually unchanged from this morning’s opening figures.

Pound (GBP) Rises as Wages Continue to Grow Despite Soaring Inflation

The Pound (GBP) is climbing against many of its peers today after mixed employment data. A mild risk-on impulse is denting Sterling elsewhere, however.

Sterling is likely being supported by indications of strong wage growth today. Average wages including bonuses rose by 6% versus a forecast rise of 5.9%. The figures may also be fueling increased bets on further interest rate hikes from the Bank of England (BoE).

Ashley Webb, an economist with consultancy Capital Economics, said:

‘Overall, while today’s release provided some tentative signs that the labour market is turning, the Bank of England will want to see concrete signs of easing wage growth.’

GBP’s gains are likely to limited however as the data release also brought evidence of a slowdown in the UK labour market. September’s unemployment rate rose to 3.6% against forecasts that the rate would remain unchanged from August’s 3.5%.

Euro (EUR) Climbs amid Persistent ECB Rate Hike Bets

The Euro (EUR) is making gains against its peers today despite a return of global risk appetite. Positive data for the Eurozone and Germany, the trading bloc’s largest member, is likely bolstering the single currency.

An above-forecast rise in German economic sentiment could be boosting EUR today. The better-than-expected reading comes amid hopes from business that inflation has peaked and will soon begin to fall.

Confirmation of 0.2% growth in the Eurozone economy in the year’s third quarter may also be lending support to EUR.

Hawkish comments from European Central Bank (ECB) policymakers in recent days could also be supporting gains for the Euro today. Speaking in Tokyo, ECB policymaker Francois Villeroy de Galhau signalled that it was likely the central bank would continue to hike interest rates above 2%.

On the other hand, more dovish comments from ECB policymaker Fabio Panetta could limit rate hike bets. Whilst Panetta advocated for further rate hikes, he also stated that acting too aggressively could worsen the trading bloc’s downturn.

GBP/EUR Exchange Rate Forecast: Will Autumn Statement Harm UK’s Outlook?

Looking to the rest of the week for the Pound, Wednesday’s inflation data could have a mixed effect on the currency. The forecast rise in October’s inflation could increase bets on further interest rate hikes from the BoE. This could in turn push Sterling higher.

On the other hand, evidence of further price rises and reduced spending power for UK households could dent confidence in the currency.

Investors will be keenly awaiting the reveal of the UK government’s Autumn statement on Thursday. Reports in recent weeks have indicated that Chancellor Jeremy Hunt is set to slash spending and hike taxes. If markets, see the measures as further harming the UK’s growth then the Pound could suffer.

Finally for the Pound, a predicted uptick in October’s retail sales could help the currency to stage a recovery after months of poor data.

The Euro will see little significant data for the rest of this week. The single currency is likely to be affected by speeches from several ECB policymakers, including President Christine Lagarde. EUR could see gains if the speeches reaffirm bets on further rate hikes from the central bank.

EUR could also see support if a diplomatic solution between Russia and Ukraine remains a possibility.

Gareth Monk

Contact Gareth Monk


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