Pound euro exchange rate rangebound following UK employment data
The pound euro (GBP/EUR) exchange rate is trading in a narrow range this morning as investors digest the UK’s latest jobs data.
At the time of writing the pound euro exchange rate is trading at around €1.1980. Virtually unchanged from this morning’s opening rate.
Pound (GBP) flat on mixed UK jobs data
The pound (GBP) is trading sideways this morning, following the release of the UK’s latest jobs report.
According to data published by the Office for National Statistics (ONS), the UK’s unemployment rate unexpectedly fell from 4.1% to 4% in August.
In addition to being the lowest rate of unemployment since January the figures showed a record number of people in work.
However, the accompanying earnings figures reported another slowdown in wage growth. Average earnings fell from 5.1% to 4.9% in August, its slowest pace in over two years.
The Bank of England (BoE) has previously highlighted it focus on wage growth in its fight to bring inflation under control.
This unsurprisingly sapped Sterling sentiment as it cemented bets for another BoE interest rate cut in November.
Ashley Webb, UK economist at Capital Economics, commented:
‘The further fall in wage growth in August, together with some signs that the labour market continued to loosen gradually, adds further support to widespread expectations that the BoE will cut interest rates from 5.00% to 4.75% at the next policy meeting in November.’
Another sore spot for the pound was how the figures highlight a lack of confidence in hiring ahead of the UK government’s upcoming Budget.
Euro (EUR) stable amid modest improvement in German economic morale
The euro (EUR) is also trading in a narrow range this morning as EUR investors react to Germany’s latest ZEW economic sentiment survey.
October’s figures reported a stronger-than-expected improvement in morale, with the index rising from 3.6 to 13.1, against forecast for a smaller rebound to 10.
The index noted the rise in sentiment was likely linked to China optimism after Beijing announced a series of stimulus measures earlier in the month.
However, with the rebound in sentiment coming from a very low base, and October’s reading still being the second lowest so far this year the data offered only limited support for the euro this morning.
Pound euro Exchange Rate Forecast: Slowdown in UK Inflation to Weaken Sterling?
Looking ahead, the pound euro (GBP/EUR) exchange rate may come under pressure on Wednesday with the publication of the UK’s latest consumer price index.
Tomorrow’s CPI figures are forecast to show that UK inflation cooled from 2.2% to 1.9% in September. Dropping it below the BoE’s 2% target for the first time since April 2021.
BoE Governor Andrew Bailey recently suggested the BoE could become a ‘bit more aggressive’ in reducing interest rates if inflation remains under control. As a result, this may apply notable pressure to Sterling if it bolsters bets for consecutive cuts in November and December.
Meanwhile, movement in the euro is likely to be limited in mid-week trade, as EUR investors brace for the European Central Bank’s (ECB) rate decision on Thursday.