Pound euro (GBP/EUR) falls to weekly low as US jobs data disappoints
(Updated 15:15, 03/05/24) The pound euro (GBP/EUR) exchange rate tumbled heading into the latter part of the session as high impact American data rocked global markets.
Both US non farm payrolls and US unemployment missed forecasts, indicating significant loosening within the American labour market and placing US employment under scrutiny once again.
Slowing US job creation and rising unemployment sparked a risk-on rally, with investors and economists alike speculating whether the Federal Reserve’s recent interest rate cut deferrals may have been misplaced.
Mahmoud Alkudsi, Senior Market Analyst at ADSS, says:
‘This is a rare miss for the US jobs market which could potentially spell the end of the ‘higher for longer’ rhetoric we have become accustomed to. This will have surprised the Fed following Wednesday’s decision to hold interest rates further.’
However, despite the bullish trading sentiment which permeated global markets, the increasingly risk-sensitive pound (GBP) fell against its euro (EUR) counterpart, as the common currency strengthened off its negative trading relationship with a weakened US dollar (USD).
At the time of writing, GBP/EUR is trading at €1.1654, up from an earlier €1.1688 and down approximately 0.3% from its opening levels.
Moving forwards, could dovish Fed commentary in the wake of today’s downbeat releases see the euro extend its gains over the weekend?
Original article continues below:
Pound euro (GBP/EUR) exchange rate rangebound following upbeat releases
The pound euro (GBP/EUR) exchange rate is wavering this morning, as upbeat data from both the Eurozone and UK leave the currency pairing subdued.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1688, virtually unchanged from this morning’s opening rate.
Pound (GBP) edges higher amid services activity upswing
The pound (GBP) is gaining ground against some of its rivals, while holding steady against others this morning, following a higher-than-forecast services PMI.
The finalised S&P Global UK Services Purchasing Managers’ Index rose to 55 in April, reaching its higher level since May 2023.
The index also surpassed market forecasts of 54.9 and jumped once again from the previous month’s figure of 53.1.
Tim Moore, Economics Director at S&P Global Market Intelligence, commented:
‘The latest survey results are consistent with the UK economy growing at a quarterly rate of 0.4% and therefore pulling further out of last year’s shallow recession.
Relief at a turnaround in the economic outlook was commonly cited as a factor supporting sales pipelines in April. However, there were also reports that clients remained somewhat risk averse and under pressure from elevated inflation.’
In the wake of yesterday’s bleak growth projections from the OECD, signs of economic revival in the UK may offer GBP investors some relief, allowing Sterling to catch some bids as the session progresses.
Euro (EUR) flat despite steady unemployment
The euro (EUR) is struggling to garner investor interest this morning despite some positive news for the Euro area’s labour market.
Unemployment in the Eurozone held steady at 6.5% in March for the third consecutive month, aligning with market forecasts and maintaining its position close to historic lows.
In light of the bloc’s economic slowdown last year, continuously resilient employment in recent months may come as a relief to the European Central Bank (ECB), as the economy regains momentum heading into the summer months.
However, investors appear largely unmoved by the upbeat release, perhaps reluctant to place any aggressive bets ahead of this afternoon’s market moving American releases.
Pound euro exchange rate forecast: US data to drive market volatility?
Looking ahead, fresh releases for both the Eurozone and the UK are in short supply for the remainder of the day.
Therefore, in the absence of domestic figures, high impact US data may serve to drive the pound euro exchange rate this afternoon.
The US non farms payroll is due for release later, with economists forecast a notable slump in the number of jobs added to the US economy in April. Should the data print as forecast, signs of a loosening labour market could dent the US dollar. In turn, a weakening ‘greenback’ may offer EUR some support, due to the currency pairings negative correlation.
However, with markets anticipating an upbeat ISM services PMI for the US, USD’s losses may be cushioned by signs of resilience in the vital sector, serving to limit EUR’s upside.
Elsewhere, market risk dynamics could impact the pound euro exchange rate. Hotly anticipated American releases could fuel bullish trading conditions, boosting the increasingly risk-sensitive pound against its rivals. Alternatively, gloomy trade could see EUR catch some bids.