Pound euro (GBP/EUR) exchange rate subdued following UK and German data
The pound euro (GBP/EUR) exchange rate is trapped in a narrow range this morning despite the release of some significant macroeconomic data from both the UK and the Eurozone.
At the time of writing, the GBP/EUR exchange rate is trading at around €1.1711, virtually unchanged from this morning’s opening rate.
Pound (GBP) rangebound despite downbeat jobs data
The pound (GBP) is managing to hold steady against the majority of its peers this morning despite the release of some underwhelming UK labour data.
The Office for National Statistics (ONS) reported that unemployment jumped to 4.2% in February, rather than a more modest expectation of 4%, and rose from an upwardly revised figure of 4% the month prior.
Furthermore, the UK’s latest average earnings (excluding bonusses) for February also deviated from expectations and printed at 6%, slightly below a 6.1% forecast.
The underwhelming data stoked fears amongst investors on the basis of a seemingly weakening UK labour market.
Stephen Evans, Chief Executive at Learning and Work Institute commented:
‘The labour market continues to ease with falls in employment and rises in unemployment and economic inactivity. Most troubling is that the UK is the only G7 country where employment remains lower than pre-pandemic levels. This is driven by rises in economic inactivity, with 2.8 million people economically inactive due to long-term sickness, a record high.’
Despite the weaker-than-forecast data release this morning, the pound is managing to hold its ground as GBP investors await a speech from Bank of England (BoE) Governor Andrew Bailey later in the session.
Euro (EUR) firms following ZEW economic sentiment survey
The euro (EUR) is edging higher against its peers this morning following the release Germany’s latest ZEW economic sentiment index.
April’s figure skyrocketed past expectations and came it at 42.9, well ahead of market expectations of a 35.9 reading, and surged from last month’s upwardly revised figure of 31.7.
This was the highest reading since February 2022, with the continued improvement in morale in the Eurozone’s largest economy serving to underpin EUR exchange rates this morning.
ZEW President Professor Achim Wambach commented:
‘A recovering global economy is boosting expectations for Germany, with half of the respondents anticipating the country’s economy to pick up over the next six months. Further contributing to the heightened optimism are the much improved assessments of the situation and economic expectations in Germany’s export destinations.’
Pound euro exchange rate forecast: UK inflation to dent Sterling?
Looking ahead, the primary driver of movement for the pound euro exchange rate this week is likely to be the release of the UK’s latest inflation data for March.
Scheduled for release tomorrow, March’s inflationary figures are forecast to report a deceleration in both headline and core inflation.
Should the data print as expected and confirm a slowdown in UK inflation towards the BoE’s 2% target, this may ramp up BoE interest rate cuts bets and in turn undermine the pound.
Also scheduled for release on Wednesday are the Eurozone’s finalised inflation figures for March. As the data is also expected to confirm cooling inflation, this may dent the Euro in mid-week trade.