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British Pound to Euro Exchange Rate Slips as UK Jobs Data Fails to Impress Economists
Published: 12 Jun at 3 PM Tags: Pound Sterling, Euro Exchange Rate, Currency Exchange, Euro Crisis, UK, Exchange Rates, Economy, Inflation, Pound Euro Exchaneg Rate,
Investors briefly perceived Britain’s latest job market results as optimistic, but the British Pound to Euro exchange rate weakened towards the end of Tuesday’s session as investors firmed in the Euro ahead of Thursday’s anticipated European Central Bank (ECB) policy decision. The bank is expected to address the withdrawal of its quantitative easing (QE) program.
Due to easing political jitters in the Eurozone, the Euro saw broadly stronger demand last week and this dragged GBP/EUR down from 1.1445 to 1.1387. GBP/EUR has continued to slip this week and at the time of writing was trending near the level of 1.1337. Still, the pair has managed to hold above last week’s monthly low of 1.1325.
Tuesday morning saw the publication of Britain’s latest job market report, which was too mixed to offer the Pound any lasting support.
While the latest employment change figure came in at 146k rather than the forecast 110k and May’s jobless claims count showed a drop in people unable to find jobs, Britain’s latest wage growth figures were comparatively disappointing.
Britain’s wage growth including bonuses figure was forecast to remain at 2.6%, but instead slipped to 2.5%. Meanwhile, the figure excluding bonuses dropped to 2.8% rather than remaining at the predicted 2.9%.
In response to the slowing wage growth results, some analysts argued it was a sign that domestic price pressures were fading. This led some to predict that the Bank of England (BoE) would leave monetary policy frozen for the remainder of the year.
According to Ben Brettell, senior economist from Hargreaves Lansdown:
‘Policymakers had been thought to be considering raising rates in August, but I still think a rate rise this year looks unlikely. The Bank will almost certainly want confirmation that the Q1 growth figure was just a blip before raising borrowing costs.’
Due to multiple economist comments that the Bank of England is now less likely to hike UK interest rates in August, the Pound eventually saw weaker performance on Tuesday afternoon.
This was despite the Eurozone’s latest disappointing business confidence data, which briefly weighed heavily on the Euro on Tuesday morning.
ZEW’s Eurozone economic sentiment survey data from June was published earlier in the day and all major prints came in well short of expectations.
Germany’s June economic sentiment index worsened from -8.2 to -16.1, below the forecast -14. Meanwhile, the overall Eurozone figure slumped from 2.4 to -12.6 rather than the expected 0.1.
ZEW’s German current conditions figure also disappointed, slipping from 87.4 to 80.6 instead of just to the forecast 85.
The data indicated to investors that Eurozone businesses were becoming increasingly concerned about the possibility of a US-sparked global trade war, as well as the impact that US trade tariffs may have on the Eurozone economy.
Despite this though, the Pound was unable to sustain notable gains against the Euro.
Euro investors remained firm on the shared currency in anticipation of Thursday’s European Central Bank (ECB) policy decision.
The ECB is not expected to be making any changes to monetary policy during its June decision, but investors are highly anticipating the bank’s forecast regarding quantitative easing (QE) and the health of the Eurozone economy.
If the bank remains confident that it will be withdrawing its aggressive QE measures before the end of the year, markets will become more confident that the bank feels the Eurozone economy can withstand current geopolitical and trade uncertainties.
As a result, the Euro may also avoid losses on Wednesday – unless Britain’s upcoming inflation results are impressive enough to boost Pound demand.
Britain’s May inflation rate results will be published on Wednesday morning and if they impress it will indicate that UK price pressures are resilient, despite the mixed UK wage data. This would likely boost Bank of England (BoE) interest rate hike bets.
If the inflation stats disappoint, the Pound to Euro exchange rate could continue to weaken in the second half of the week.
Due to easing political jitters in the Eurozone, the Euro saw broadly stronger demand last week and this dragged GBP/EUR down from 1.1445 to 1.1387. GBP/EUR has continued to slip this week and at the time of writing was trending near the level of 1.1337. Still, the pair has managed to hold above last week’s monthly low of 1.1325.
Tuesday morning saw the publication of Britain’s latest job market report, which was too mixed to offer the Pound any lasting support.
While the latest employment change figure came in at 146k rather than the forecast 110k and May’s jobless claims count showed a drop in people unable to find jobs, Britain’s latest wage growth figures were comparatively disappointing.
Britain’s wage growth including bonuses figure was forecast to remain at 2.6%, but instead slipped to 2.5%. Meanwhile, the figure excluding bonuses dropped to 2.8% rather than remaining at the predicted 2.9%.
In response to the slowing wage growth results, some analysts argued it was a sign that domestic price pressures were fading. This led some to predict that the Bank of England (BoE) would leave monetary policy frozen for the remainder of the year.
According to Ben Brettell, senior economist from Hargreaves Lansdown:
‘Policymakers had been thought to be considering raising rates in August, but I still think a rate rise this year looks unlikely. The Bank will almost certainly want confirmation that the Q1 growth figure was just a blip before raising borrowing costs.’
Due to multiple economist comments that the Bank of England is now less likely to hike UK interest rates in August, the Pound eventually saw weaker performance on Tuesday afternoon.
This was despite the Eurozone’s latest disappointing business confidence data, which briefly weighed heavily on the Euro on Tuesday morning.
ZEW’s Eurozone economic sentiment survey data from June was published earlier in the day and all major prints came in well short of expectations.
Germany’s June economic sentiment index worsened from -8.2 to -16.1, below the forecast -14. Meanwhile, the overall Eurozone figure slumped from 2.4 to -12.6 rather than the expected 0.1.
ZEW’s German current conditions figure also disappointed, slipping from 87.4 to 80.6 instead of just to the forecast 85.
The data indicated to investors that Eurozone businesses were becoming increasingly concerned about the possibility of a US-sparked global trade war, as well as the impact that US trade tariffs may have on the Eurozone economy.
Despite this though, the Pound was unable to sustain notable gains against the Euro.
Euro investors remained firm on the shared currency in anticipation of Thursday’s European Central Bank (ECB) policy decision.
The ECB is not expected to be making any changes to monetary policy during its June decision, but investors are highly anticipating the bank’s forecast regarding quantitative easing (QE) and the health of the Eurozone economy.
If the bank remains confident that it will be withdrawing its aggressive QE measures before the end of the year, markets will become more confident that the bank feels the Eurozone economy can withstand current geopolitical and trade uncertainties.
As a result, the Euro may also avoid losses on Wednesday – unless Britain’s upcoming inflation results are impressive enough to boost Pound demand.
Britain’s May inflation rate results will be published on Wednesday morning and if they impress it will indicate that UK price pressures are resilient, despite the mixed UK wage data. This would likely boost Bank of England (BoE) interest rate hike bets.
If the inflation stats disappoint, the Pound to Euro exchange rate could continue to weaken in the second half of the week.
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Source: moneytransfer.co.uk