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Pound to Euro (GBP/EUR) Exchange Rate Volatility Forecast if UK Wage Squeeze Returns

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Risk of Inflation Exceeding Earnings could Trigger GBP/EUR Exchange Rate Decline

The Pound to Euro exchange rate has made a minor advance on 13th April, but remains at risk of declining when UK data comes out on the week starting 16th April.

The main announcements will come over 17th and 18th April, consisting of earnings and unemployment figures in the former case and inflation rate stats in the latter.

Current forecasts are for wage growth with bonuses to slow in February from 2.8% to 2.6%, while unemployment in the same month is tipped to rise from 4.3% to 4.4%.

Even on their own, these results could devalue the Pound, given that they both represent a step back in terms of national economic stability.

Additional damage may come if the inflation rate reading for March shows a year-on-year rise from 2.7% to 2.8%.

All of these factors combined would mean that the UK’s progress towards eliminating the wage squeeze would be reversed and the Pound could tumble against the Euro.

This is because Pound traders could assume that a near-term Bank of England (BoE) interest rate hike is less likely, due to the perceived return to an unstable UK economy.

Chance of Further GBP/EUR Losses if UK Retail Sales Fall after ‘Beasts from the East’

Other upcoming UK data that might end up harming the Pound will be retail sales figures for March, due out on 19th April.

Potentially reflecting the bad weather that struck the UK twice during the month, sales activity is predicted to have slowed in almost all fields.

Slower retail sales activity might be discounted as a symptom of the one-off snow storms, but could still also result in a Pound to Euro exchange rate decline.

Rise in Eurozone Inflation Rates could Trigger EUR/GBP Exchange Rate Rally

While higher inflation in the UK might weaken the Pound in the week ahead, the Euro could rally if Eurozone inflation rate levels are reported higher.

The Eurozone-wide stats, out on 18th April, are expected to show a rise in base month-on-month and year-on-year inflation rate levels in March.

Increasing levels of price growth will increase the likelihood of a European Central Bank (ECB) interest rate hike, as levels slowly creep up towards the ECB’s target of 2%.

While the ECB isn’t expected to act immediately on higher Eurozone inflation, a forecast-matching rise could still lead to the Euro advancing against the Pound.

Will EUR/GBP Exchange Rate See Late-Week Slump on Consumer Confidence Stats?

Following next week’s Eurozone inflation data, there could be a late-week Euro to Pound exchange rate decline on the Eurozone consumer confidence flash for April.

This estimate of changes to consumer confidence levels might end up weakening the Euro if it shows an as-expected decline from 0.1 points in March to -0.1 in April.