Pound euro (GBP/EUR) exchange rate ticks up UK unemployment beats forecasts
The pound euro (GBP/EUR) exchange rate is climbing higher this morning following a stronger-than-forecast batch of UK labour data.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1717, up approximately 0.3% from this morning’s opening rate.
Pound (GBP) inches higher amid cheery trade
The pound (GBP) is posting modest gains against some of its rivals this morning following a better-than-forecast set of UK jobs data.
British unemployment eased to 4.2% in June, dipping from an almost three-year high of 4.4%, and printing below market projections of 4.5%.
Meanwhile, wage growth slowed less than expected. Average earnings (excluding bonuses) eased to 5.4% in the three months prior to June 2024, cooling from an upwardly revised 5.8% and dropping to its lowest level in nearly two years.
However, the data came in significantly above forecasts of 4.6%, indicating that underlying wage pressures persist in the UK.
Rob Morgan, Chief Investment Analyst at Wealth Manager Charles Stanley, commented:
‘Today’s job numbers have all but ended hopes of a further interest rate cut for a few months. Wage inflation is a key number to help the BoE assess how quickly it should cut interest rates as it’s a significant component of services sector prices.’
The upbeat release may serve to quell Bank of England (BoE) rate cut bets in the near term, signalling that the central bank could have more scope to defer further monetary unwinding heading into the latter part of the year. In turn, GBP may continue to climb higher as the session progresses.
Euro (EUR) stumbles on waning morale
The euro (EUR) is struggling to garner investor interest this morning following a sharp decline in Germany’s latest ZEW economic sentiment indicator.
The index fell notably more than expected, tumbling to 19.2 in August, from a previous reading of 41.8 and falling well below market forecasts of a more modest decline to 32.
Professor Achim Wambach from ZEW commented:
‘The economic outlook for Germany is breaking down.
It is likely that economic expectations are still affected by high uncertainty, which is driven by ambiguous monetary policy, disappointing business data from the US economy and growing concerns over an escalation of the conflict in the Middle East.’
Elsewhere, a cautiously upbeat market sentiment applies further pressure to the safe-haven currency, leaving EUR on the back foot this morning.
Pound euro exchange rate forecast: UK inflation in focus
Looking ahead, the UK’s latest batch of inflation data is due for release tomorrow morning. Headline inflation is due to rise to 2.3% in July, after holding steady at the BoE’s 2% target rate since May. Renewed signs of stubborn UK inflationary pressures may quell speculation that the central bank could deliver two further rate cuts this year, thereby bolstering the pound.
Meanwhile, core inflation in the UK is due to ease to 3.4% in July, cooling from a previous reading of 3.5%. Overall, signs of persistently sticky UK inflation will likely see GBP consolidate its recent gains amid a potential pullback in BoE rate cut bets.
Looking to the Eurozone, the latest employment change report is due for release. Economists expect to see a 0.2% rise in employment throughout the second quarter, easing from 0.3% in the first quarter of 2024, which could undermine the single currency.