Pound euro (GBP/EUR) exchange rate slips as UK unemployment rises
The pound euro (GBP/EUR) exchange rate is trending lower this morning, in the wake of the UK’s latest labour figures.
At the time of writing, GBP/EUR is trading at around €1.1618, a roughly 0.2% dip from this morning’s opening levels.
Pound (GBP) undermined by cooling UK labour market
The pound (GBP) is facing headwinds this morning and has dipped against the majority of its peers following the release of the UK’s latest jobs report.
The data showed that UK unemployment rose in March, rising from 4.2% to 4.3%, an eight-month high.
This has led markets to speculate on the likelihood of a Bank of England (BoE) interest rate cut in June, with money markets now showing an over 50% change that the central bank will begin loosening monetary policy next month, undermining Sterling sentient.
James Smith, Developed Markets Economist at ING, comments:
‘The UK jobs market is cooling and that’s gradually translating into lower wage growth. This is the main takeaway from the latest UK labour market figures and is broadly consistent with the messaging from the Bank of England last week… [We] slightly favour August over June as the start date for rate cuts. But in all honesty, we think it’s looking pretty 50-50 right now.’
However, stronger-than-expected wage growth data in March served to limit GBP losses this morning, with average earnings holding at 6% rather than slowing to 5.9% as forecast.
Euro (EUR) supported by economic sentiment
The euro (EUR) is being underpinned this morning by a stronger-than-expected German ZEW economic sentiment index for May.
The data beat expectations and printed at 47.1 rather than a more modest estimate of 46 and rose from last month’s reading of 42.9.
The forecast beating improvement in morale has lent the common currency some modest support this morning, however, the euro is seeing any potential gains capped following Germany’s latest inflation data.
As April’s finalised inflation reading printed at 2.2% in the Eurozone’s largest economy, just shy of the European Central Bank’s (ECB) 2% target, this has seen the single currency struggle to garner investor attention thus far.
Pound euro exchange rate forecast: Eurozone industrial production to drag on Euro?
Looking ahead, the primary driver of movement for the pound euro exchange rate tomorrow will likely be the Eurozone’s latest industrial production figures.
March’s data is forecast to drastically drop, falling from a previous reading of 8 down to an expected -0.2% reading.
Should the data print as expected and show a dramatic reduction in the Eurozone’s industrial production figures, this could undermine the single currency in mid-week trade.
Turning to the pound, the majority of this week will see limited UK economic data which will likely see GBP exchange rates trade in line with risk dynamics.
Should a more downbeat mood prevail this week, the pound is likely to remain on the defensive, however, should markets engage in more positive trading conditions, Sterling sentiment could be buoyed.