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GBP/EUR Exchange Rate Muted amid Downbeat UK Jobs Data

Pound coin on a Euro banknote

GBP/EUR Exchange Rate Subdued as Wage Growth Falls

The Pound Euro (GBP/EUR) exchange rate is trading in a narrow range this morning, following the release of some disappointing UK jobs data.

At the time of writing the GBP/EUR exchange rate is trading at around €1.1613. Virtually unchanged from this morning’s opening rate.

Pound (GBP) Dips on UK Jobs Data

The Pound (GBP), although rangebound against the Euro, is trending lower than the majority of its peers today.

This comes after the release of the most recent UK average earnings (excluding bonus), and the latest unemployment figures this morning.

While UK unemployment held steady at 4.2% as expected, UK average earnings came in at 6.6% for November, slowing from a downwardly revised 7.2% the month prior, and also matching market expectations. This reports the third successive fall in regular wage growth, and came in at the lowest figure since January 2023.

The sharp deceleration in wage growth is weighing on GBP exchange rates as it stokes Bank of England (BoE) rate cut speculation, as more and more investors price in cuts sooner than expected.

Samuel Tombs, Chief UK Economist at Pantheon Macroeconomics commented:  

‘The MPC can be more confident that wage gains have slowed following today’s release, but likely still will be too worried about the near-term outlook to signal at next month’s meeting that it will reduce Bank Rate multiple times this year.’

Set for release on Wednesday are the latest UK core and headline inflation figures. With both forecast to slightly fall, this could heighten the pressure on Sterling throughout the rest of the week.

Euro (EUR) Mixed despite Upbeat German Inflation

The Euro (EUR) is fluctuating today, following the release of Germany’s final inflation figures for December. The finalised figures confirmed inflation climbed to 3.7%, up from November’s two-year low of 3.2%.

Despite the strong inflation print, the Euro is struggling to find support today and is mostly fluctuating against its peers.

Potentially able to serve as an aid to the single currency is the latest German economic sentiment index. Coming in above market expectations at 15.2, this month’s index highlights the improving outlook for the Eurozone’s largest economy, and is lending some support to the Euro this morning.

Looking ahead, likely to drive Euro exchange rates are a number of speeches by European Central Bank (ECB) officials over the next few days. Comments by ECB President Christine Lagarde will be watched particularly closely by EUR investors. If she continues to push back against interest rate cut speculation the Euro may strengthen.

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