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Pound Sterling to Euro Exchange Rate Investors Turn Attention to German Data and European Central Bank (ECB)

Pound to Euro Exchange Rate Steady as UK Job Market Report Comes in Mixed

Following a jump in demand for the Pound Sterling to Euro (GBP/EUR) exchange rate yesterday, the pair has steadied today. Investors saw little reason to make further big moves on the Pound (GBP) as they digested the day’s mixed UK job market report.

Due to hopes for a no-deal Brexit to be avoided, as well as anticipation for this week’s upcoming European Central Bank (ECB) policy decision, GBP/EUR was highly volatile last week and ended up closing the week near the week’s opening levels of 1.1068.

This week so far though, GBP/EUR has already sustained gains, even briefly touching a two-month-high of 1.1221 yesterday. At the time of writing, GBP/EUR was trending close to the level of 1.1166.

Sterling gained in reaction to Monday’s UK political and economic news, but the Pound to Euro exchange rate may struggle to sustain further gains if upcoming German data or European Central Bank (ECB) news impresses investors.

Pound (GBP) Exchange Rates Steady as Parliament Prorogued and UK Job Stats Mixed

The Pound has been able to sustain most of the advances it saw on the back of yesterday’s stronger than expected UK Gross Domestic Product (GDP) growth rate report, but the British currency saw steadier trade overall today.

Today’s job market report from July came in mixed, with a lower number of new jobs created than expected, while the key unemployment rate and wage growth including bonus figures unexpectedly improved.

While many of the stats seemed impressive, there were downsides to the report that weighed on any optimism from it.

The smaller than expected number of new jobs made reflected the detail that job vacancies were falling. According to Tej Parikh, Chief Economist at the Institute of Directors, Brexit uncertainty is a likely factor in why this is:

‘Vacancies are likely to continue falling. It’s becoming harder for business leaders to do any meaningful workforce planning, let alone find the talent that they need. High costs and an unclear view of future revenue have also led some to hold off on new hires.’

Euro (EUR) Exchange Rates Steady as Investors Look to Eurozone Data and ECB

Demand for the Euro has weakened since the end of last week, when weaker than expected German production data worsened fears that Germany’s economy was headed for recession.

However, this week so far, Euro movement has been fairly steady. Investors are anticipating major Eurozone data and European Central Bank (ECB) news due later in the week before making any fresh major moves on the currency.

Investors have been hesitant to sell the Euro too much despite these German recession fears, due to hopes that Germany’s government could prepare new fiscal stimulus to boost the economy.

Weakness in its rival, the US Dollar (USD), amid the recent rise in risk-sentiment has also kept the Euro from falling further.

Pound to Euro (GBP/EUR) Exchange Rate Awaits German Inflation and European Central Bank (ECB)

While the Pound to Euro (GBP/EUR) exchange rate has advanced so far this week, its potential for further gains may depend more on Euro weakness than Pound strength due to the Brexit uncertainties still weighing on the Pound outlook.

With UK Parliament prorogued until mid-October, developments in politics and Brexit are likely to be limited, which could lead to another extended period of speculation and uncertainty.

Fresh signs that Prime Minister Boris Johnson could still attempt a no-deal Brexit will likely continue to weigh on the Pound, and instability in the government or in domestic politics at large are also likely to keep pressure on the currency.

As a result, GBP/EUR investors are also looking ahead to Thursday’s session when Germany’s final August inflation rate report will be published, and the European Central Bank (ECB) will hold its September policy decision.

Germany’s economic outlook could worsen if inflation disappoints, and the Pound to Euro (GBP/EUR) exchange rate would be able to advance even more smoothly if the ECB takes a more dovish than expected stance on Eurozone monetary policy