Pound Euro (GBP/EUR) exchange rate dented as UK unemployment rises
The Pound Euro (GBP/EUR) exchange rate is on the back foot this morning following an unexpected increase in UK unemployment.
At the time of writing, GBP/EUR is trading at €1.1699, down roughly 0.2% from this morning’s opening rate.
Pound (GBP) weakens amid increase in unemployment
The Pound (GBP) is facing headwinds this morning following the release of the latest UK jobs data.
UK unemployment unexpectedly increased in the three months leading to January, from 3.8% to 3.9%, whilst average earnings (excluding bonusses) surprised investors by cooling, from 6.2% to 6.1% over the same period.
The latest domestic jobs data has stoked Bank of England (BoE) interest rate cut speculation. Analysts are now predicting the BoE will start cutting rates in June rather than August, which in turn is undermining Sterling sentiment this morning.
Paul Dales, chief UK economist at Capital Economics, commented:
‘The easing in wage growth in January is probably still a bit too slow for the Bank of England’s liking.
‘But there are encouraging signs that a more marked slowdown is just around the corner and that an interest rate cut in June is possible.’
Euro (EUR) mixed following German inflation
The Euro (EUR) is fluctuating this morning, firming against some of its peers but muted elsewhere, following the release of Germany’s latest inflation figures.
Inflation in the Eurozone’s largest economy printed in line with initial estimates, with February’s finalised data reporting it cooled from 2.9% to 2.5%.
This marked the lowest inflation level in Germany since June 2021, and was largely attributed to a sharp slowdown in food inflation.
Ruth Brand, president of the Federal Statistical Office said:
‘The rate of inflation has continued to slow. The price situation for energy products continues to ease. The increase in food prices has slowed markedly and is now below the overall inflation rate for the first time in more than two years.’
Confirmation that German inflation is nearing the European Central Bank’s (ECB) 2% target has pressured the Euro this morning, as it reinforces expectations for a spring rate cut.
Pound Euro exchange rate forecast: UK GDP to bolster the Pound?
Looking ahead, the primary catalyst of movement for the Pound Euro exchange rate on Wednesday is likely to be the release of the UK’s latest GDP data.
UK GDP in January is expected to rise, from -0.1% to 0.2%.
Should the data confirm that the UK economy returned to growth at the beginning 2024, it will boost hopes the UK has already rebounded from its recession. Potentially dampening BoE rate cut speculation and bolstering GBP exchange rates.
Turning to the Euro, the Eurozone’s latest industrial production figures are scheduled for release tomorrow, and are expected to report factory output in the bloc plummeted from 2.6% to -1.5% in January, likely dragging on EUR sentiment.