ExchangeRates.org.uk - At the time of writing, GBP/EUR traded at around €1.1863, up roughly 0.2% from Tuesday’s opening rate. The pound (GBP) ticked up against most of its peers on Tuesday after the release of the UK's latest labour data. The unemployment rate fell to 4.1% in July, down from 4.2%, boosting the GBP exchange rate. Meanwhile, average earnings (excluding bonuses) declined, slipping from 5.4% to 5.1%, rather than falling further to 4.9%. Despite signs of persistent wage growth, the pound managed to stay above ground as markets remained confident that the Bank of England (BoE) would hold its current interest rate in the coming week’s decision.
Richard Carter, Head of Fixed Interest Research at Quilter (LON:QLT) Cheviot, commented: ‘Though wage growth is coming down, it remains significantly higher than the Bank’s 2% inflation target. In real terms, average regular earnings are rising by 2.9%. While this may help buoy consumer confidence, it will still be of some concern to the BoE. The Bank of England’s next interest rate decision is now just over a week away, and today’s data, alongside the inflation and GDP prints due out before it meets, will no doubt play a major role in whether it opts to reduce rates further or hold for now.’
Euro (EUR) Exchange Rates Undermined by German Inflation
The Euro (EUR) is facing fresh headwinds this morning following the release of Germany’s finalised consumer price index (CPI) for August. The data confirmed that inflation fell below the European Central Bank (ECB) 2% target, dropping from 2.3% to 1.9%. As inflation in the Eurozone's largest economy continues to slow, speculation around a potential ECB interest rate cut has intensified, just two days ahead of the central bank's upcoming decision, stymieing EUR exchange rates in the process.
President of the Federal Statistical Office Ruth Brand commented: ‘Falling energy prices slowed inflation more significantly in August than in the previous months. On the other hand, price increases for services, which are still above average, drove inflation up.’
Looking ahead, the key driver for the Pound Euro exchange rate on Wednesday will likely be the release of the UK’s latest GDP figures. The data is expected to show that the British economy grew by 0.2% in July, which could provide some modest support to GBP exchange rates if it meets forecasts. As for the euro, on Thursday, the European Central Bank (ECB) is set to announce its latest interest rate decision, which could spark volatility in EUR exchange rates. With a 25-basis point cut already largely anticipated, the euro is likely to weaken against its peers if the ECB follows through with market expectations.
This content was originally published on ExchangeRates.org.uk
