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GBP/EUR Exchange Rate Trades at One-Week High
The Pound Euro (GBP/EUR) exchange strengthened on Tuesday following the publication of both the UK’s latest labour report and Germany’s latest ZEW economic sentiment index. At the time of writing, GBP/EUR traded at around €1.1861, up roughly 0.3% from Tuesday’s opening rate.
Pound (GBP) Firms thanks to Domestic Labour Data
The Pound (GBP) posted modest gains against the majority of its peers on Tuesday following the publication of The Office for National Statistics (ONS) latest domestic jobs report. The report showed that UK unemployment unexpectedly fell from 4.4% to 4.2% in the three months leading up to June, rather than rising to 4.5% as expected. Further supporting GBP were the latest average earnings (excluding bonuses) for the same time period, which fell from a previous reading of 5.8% down to 5.4% rather than a larger plummet down to 4.6% as expected. The latest round of labour data lent Sterling some modest support on Tuesday as the reading served to undermine current Bank of England (BoE) interest rate cut bets.
Rob Morgan, Chief Investment Analyst at Wealth Manager Charles Stanley, explained: ‘Today’s job numbers have all but ended hopes of a further interest rate cut for a few months. Wage inflation is a key number to help the BoE assess how quickly it should cut interest rates as it’s a significant component of services sector prices.’
Euro (EUR) Stumbles following Underwhelming German Data
The Euro (EUR) experienced fresh selling pressures on Tuesday following the publication of Germany’s latest ZEW economic sentiment index. August’s indictor fell much more than expected, falling from a previous reading of 41.8 down to 19.2, well behind a more modest 32 prediction. The data not only highlighted a clear slowdown in morale in the Eurozone’s largest economy, but also printed at a seven-month low, stymieing the common currency in the wake of the release.
Professor Achim Wambach from ZEW commented following the publication: ‘The economic outlook for Germany is breaking down. It is likely that economic expectations are still affected by high uncertainty, which is driven by ambiguous monetary policy, disappointing business data from the US economy and growing concerns over an escalation of the conflict in the Middle East.’
Also tempering with EUR exchange rates on Tuesday was an improvement in risk appetite. As markets opted for riskier assets, the safe-haven Euro struggled to garner investor attention.
GBP/EUR Forecast: UK Inflation to Drive Movement
Looking ahead, the primary catalyst of movement for the Pound Euro exchange rate on Wednesday will be the publication of the UK’s latest inflation data. As the UK’s headline inflation rate is forecast to rise, expected to move away from the Bank of England’s 2% target, could this further dampen BoE rate cut bets and in turn underpin Sterling sentiment? Turning to the euro, the Eurozone’s latest employment change is forecast to fall from 0.3% to 0.2% on Wednesday and could infuse the single currency with volatility should the data print as expected.
This content was originally published on ExchangeRates.org.uk
