Pound Euro Exchange Rate Fluctuates amid Unimpressive Employment Figures
The Pound Euro (GBP/EUR) exchange rate is trading erratically this morning in the wake of mixed UK jobs data. Despite unemployment figure remaining unchanged for three months, the number claiming unemployment benefits increased the most since February 2021.
At time of writing the GBP/EUR exchange rate is trading around €1.1292, relatively unchanged from this morning’s opening levels.
Pound (GBP) Undermined by Weakening Labour Market
The Pound is struggling for demand this morning amid an underwhelming jobs report from the Office for National Statistics (ONS). Despite unemployment remaining at 3.7% for a third consecutive month, underlying data is concerning investors.
The number of people claiming unemployment benefits rose by 19.7k, far more than the 16.1k recorded last month. The figure marks the largest increase since February 2021. Wage growth also appeared to accelerate once more as both figures beat expectations. Pay, excluding bonuses, rose by 6.4%, the largest jump since records began in 2001. Wages including bonuses also jumped by the same figure.
Pessimism surrounding the UK labour market is shared by Bank of England (BoE) Governor Andrew Bailey as he testified before the Treasury Select Committee yesterday. Bailey warns that despite the prospect of inflation falling rapidly, worker shortage could still pose major economic risks.
Euro (EUR) Wary of Ongoing Energy Crisis in 2023
Meanwhile, the Euro is also struggling for a clear direction amid a lack of major economic data. With expectations of the bloc’s largest economy to contract in 2023, the ongoing energy crisis is weighing on investors’ minds.
BDI, the voice of German industry, has warned that the economy is expected to contract this year as the energy crisis would continue to weigh heavily. The BDI President, Siegfried Russwurm, has said that Germany runs the risk of falling behind other countries where energy prices are lower. He added:
‘The cost factor of energy has for long not only weakened energy-intensive companies, but has also had a noticeable impact on the entire value chains of industry.’
Pound Euro Forecast: Softening Inflation to Boost the Pound?
Looking ahead, the Pound Euro exchange rate could see further movement with the latest UK inflation reading. An expected mild softening will unlikely see the BoE deviate from its rate hiking course, which could buoy GBP investors.
Meanwhile, Eurozone inflation is also set to soften, albeit at a much faster pace. However, with inflation also remaining far above the central bank’s target rate, further rate hikes are to be expected, potentially boosting the Euro.