Pound Sterling Euro (GBP/EUR) Exchange Rate Muted as UK Jobless Claims Jump to 24-Year High
The Pound Sterling Euro (GBP/EUR) exchange rate remained flat, leaving the pairing trading at around €1.1171.
Sterling remained under pressure against the single currency on Tuesday following the release of disappointing UK employment data.
This morning’s data revealed April’s UK jobless claims jumped to the highest level since 1996.
The number of Britons claiming unemployment benefits jumped by a record high as the country spent the entire month in lockdown.
The Office for National Statistics showed the country’s claimant count skyrocketed by 856,500.
However, data also showed that the increase in claims would have been higher if the government had not introduced the furlough scheme.
Those furloughed are being paid 80% of their wages by the government and put on temporary leave. This did not count towards the unemployment total, which slipped to 3.9% in March.
According to Tej Parikh, chief economist at the Institute of Directors, while the scheme is currently holding off some losses for now, what will happen when firms are required to help fund the scheme in August is unclear.
‘Many companies will still be in the middle of a cashflow crisis, and will struggle with any cost increases. Government faces an onerous task in winding down the scheme without causing too much pain.’
Euro (EUR) Flat as German Investor Sentiment Improves
The single currency remained under pressure as traders moved towards riskier assets such as the Pound. Risk sentiment improved after encouraging results from a coronavirus drug trial.
Meanwhile, data from the bloc’s largest economy showed investor sentiment improved more than expected in May.
Concerns about the impact of the coronavirus pandemic eased and hopes for a slow recovery in the second half of 2020 sent sentiment higher.
ZEW’s monthly survey revealed economic sentiment amongst investors increased from 28.2 in April to a better-than-expected 51.0 in May.
In a statement, ZEW President, Achim Wambach said:
‘Optimism is growing that there will be an economic turnaround from summer onwards.’
However, in a separate measure gauging investors’ assessment of the current economic situation, conditions deteriorated.
ZEW’s current conditions index slumped from -91.5 to a lower-than-forecast -93.5 in May.
Pound Euro Outlook: Eurozone and UK Inflation in Focus
Looking ahead, the Pound (GBP) could slump against the Euro (EUR) following the release of UK inflation data.
If inflation moves further from the Bank of England’s (BoE) inflation target, it will leave Sterling under pressure.
However, any gains in the single currency could be short-lived following the release of the Eurozone’s inflation rate.
If April’s inflation plummets to the lowest level since 2016, it will leave the Pound Euro (GBP/EUR) exchange rate largely flat.