Sterling Recovers Yesterday’s Losses against the Euro (GBP/EUR) as Latest Employment Figures Reveal a Surprise Uptick in Average Weekly Earnings
The Pound (GBP) gained around 0.3% against the Euro (EUR) this morning following the release of the UK’s latest employment figures by the National Statistics Office.
The pace of UK wage growth in August without bonuses was revealed to have risen by 3.1% – which is the fastest recorded increase since 2009.
Furthermore, taking bonuses into account, the figure also revealed an unexpected increase to 2.7% – with economists forecasting it would have fallen to 2.4%
In some slightly more disappointing news however, it was also revealed that the number of people claiming unemployment benefit had risen by 18.5k in September, although that didn’t affect the unemployment rate which is still holding at a 44-year-low of 4%.
Disappointing Eurozone Data Helps GBP/EUR Exchange Rate Consolidate Gains
Earlier today a survey result sent shockwaves across Germany and the Eurozone at large, aiding the Pound’s ascent against the shared currency.
A couple of ZEW surveys of Eurozone and German economic sentiment came in far lower than forecast which could spell trouble for the Eurozone economy going forwards.
The survey relating to current economic sentiment in Germany was expected to show a slight fall to -11.3, but instead registered a much greater decline to -24.7.
EU Summit and Brexit to Dominate GBP/EUR Sentiment for the Rest of the Week
Tomorrow will see the start of a much anticipated EU summit where Brexit will be the main focus.
Although expectations of a deal between the UK and the EU had been high, these were quashed over the weekend when Theresa May revealed that she would not be willing to capitulate on the issue of the Irish border and the proposed ‘backstop’ arrangement.
The Prime Minster addressed the UK House of Commons yesterday to issue a reassurance that agreement towards a deal was still ‘on track’ so Sterling investors will be monitoring the EU summit closely, with any indications that a deal is indeed forthcoming likely to give the Pound a substantial boost.
GBP/EUR Exchange Rate Outlook: UK and Eurozone Inflation in the Spotlight
Looking ahead, the next salient data release for the UK comes tomorrow in the form of inflation figures for September.
With both monthly and annual inflation forecast to slow, we can expect to see some downside movement in the GBP/EUR exchange rate upon their release.
Hot on the heels of the UK inflation figures will come some finalised Eurozone price growth data for September.
Currently economists forecast a faster pace of price growth for the year-on-year reading, with an increase from 2% to 2.1% pencilled in.
Although only a small increase, it would put inflation above the European Central Bank’s target range, meaning the technical likelihood of a rate rise in 2019 would jump, with a corresponding drop in the GBP/EUR exchange rate.