The Euro to Pound Sterling (EUR/GBP) exchange rate continued to weaken on Wednesday and more losses are forecast as market attention turns to this evenings US Federal Reserve policy statement and interest rate decision.
The Euro to Pound Sterling (EUR/GBP) exchange rate weakened earlier on Wednesday as economic data out of the UK came in strongly and as inflation in the Eurozone slowed to 0.3% in November, increasing pressure on the European Central Bank to introduce new easing measures in 2015.
Pound Sterling Exchange Rate Supported by Data
Sterling strengthened against the majority of its most traded peers as data released by the London based Office for National Statisitcs showed that UK unemployment dropped in the third quarter and wage growth outpace inflation for the first time in nine months.
The UK’s unemployment rate remained at 6%, slightly disappointing economists who had been forecasting for a drop to 5.9%. That disappointment was shrugged off however, as the number of UK citizens claiming unemployment benefits fell by 26,900 in November, a better figure than the fall of 21,200 forecast.
A separate report showed that UK worker earnings grew more than inflation in October. Pay growth including bonuses increased by 1.4% whilst pay excluding bonuses rose by 1.6%. The rises were the biggest seen in seven months and surpassed October’s inflation rate of 1.3%.
Also released on Wednesday was the release of the minutes of the Bank of England’s (BoE) December policy meeting.
The minutes showed that policy makers voted 7-2 to leave interest rates at the record low level of 0.5% as the majority stated that wage growth was not enough to warrant a rise in interest rates.
‘As yet, pay growth was only roughly in line with, rather than in excess of, productivity growth. Further increases would be required to be consistent with meeting the 2% inflation goal,’ said the Minutes.
The usual suspects Martin Weale and Ian McCafferty voted for a rate rise, as they believe an increase is now justified.
Eurozone Inflation Remains in Danger Zone
The Euro weakened against most of its major peers as data showed that inflation in the Eurozone slowed to just 0.3% in November. The figure is the lowest level seen since 2009 and is a further move away from the European Central Bank’s target rate of just under 2%.
Eurostat blamed falling oil prices and cheaper telecoms services for the drop. Without the volatile prices of energy and unprocessed food taken into account, or what the European Central Bank called “core inflation”, prices fell 0.1 percent month-on-month in November for a 0.7 percent year-on-year rise the same as in October.
Euro to Pound Sterling (EUR/GBP) Exchange Rate
The Euro to Pound Sterling exchange rate hit a session high of 0.7954
The Euro to Pound Sterling exchange rate hit a session low of 0.7909
The Euro to Pound Sterling exchange rate was trading in the region of 0.7928
