Pound euro exchange rate firms following UK jobs data and German inflation
The pound euro (GBP/EUR) exchange rate is edging higher this morning following the publication of the UK’s latest labour data alongside Germany’s finalised inflation reading.
At the time of writing, GBP/EUR is trading at around €1.1849, up roughly 0.2% from this morning’s opening levels.
Pound (GBP) supported by employment data
The pound (GBP) firmed against the majority of its peers this morning following the publication of the UK’s latest jobs data.
The latest unemployment data reported that UK unemployment fell to 4.1% in July, retreating from a previous reading of 4.2%, buoying GBP exchange rates.
The latest average earnings (excluding bonuses) declined less than expected in the same time period, falling from 5.4% to 5.1% rather an expected 4.9% reading.
However, despite signs of stubborn wage growth, the pound has remained on its positive trajectory as many economists are still expecting the Bank of England (BoE) to maintain its current interest rate at its upcoming decision next week.
Richard Carter, Head of Fixed Interest Research at Quilter Cheviot, commented:
‘Though wage growth is coming down, it remains significantly higher than the Bank’s 2% inflation target. In real terms, average regular earnings are rising by 2.9%. While this may help buoy consumer confidence, it will still be of some concern to the BoE.
The Bank of England’s next interest rate decision is now just over a week away, and today’s data, alongside the inflation and GDP prints due out before it meets, will no doubt play a major role in whether it opts to reduce rates further or hold for now.’
Euro (EUR) undermined by German PPI
The euro (EUR) is struggling to garner investor attention this morning following the publication of Germany’s finalised consumer price index for August.
This morning’s data confirmed that inflation cooled below the European Central Bank’s (ECB) 2% target, falling from a previous reading of 2.3% down to 1.9%.
As inflation continues to cool in the Eurozone’s largest economy, this has served to ramp up ECB interest rate cut bets further, just two days ahead of the ECB’s upcoming decision.
President of the Federal Statistical Office Ruth Brand commented:
‘Falling energy prices slowed inflation more significantly in August than in the previous months. On the other hand, price increases for services, which are still above average, drove inflation up.’
Pound euro exchange rate forecast: UK GDP in the spotlight
Looking ahead, the primary catalyst of movement for the pound euro exchange rate looking ahead to tomorrow will likely be the publication of the UK’s latest month-on-month GDP reading.
Tomorrow’s figure is forecast to report that the British economy grew by 0.2% in July, and could offer GBP exchange rates some modest support should the data print as expected.
Turning to the euro, the ECB will meet to enact its latest interest rate decision on Thursday, which could infuse volatility into EUR exchange rates.
As a 25-basis point cut is almost fully priced in, the single currency will likely slump against its peers should the central bank mirror expectations on Thursday.