The Euro began local trading on the back-foot against the Pound as investors focused on the UK’s influential employment report and the EUR/GBP pairing went on to push beyond a one-year low as the Pound surged in response to surprisingly strong figures.
As the UK economy added 280,000 positions in the three months to November the UK unemployment rate dropped from 7.4 per cent to 7.1 per cent rather than falling to 7.3 per cent as expected.
Sterling consequently surged by 0.5 per cent against the Euro and gained on the US Dollar.
The GBP/EUR movement prompted this response from currency strategist Daragh Maher; ‘The Pound has justifiably rallied on the better-than-forecast number but the same questions remain over the sustainability of the UK recovery. Importantly, the BoE stressed that breaching the unemployment threshold would not be a trigger for a rate hike. But for now, the data rules and the Pound is capitalising.’
As the Bank of England had previously intimated that interest rates would be raised from record lows once unemployment hit 7.0 per cent today’s BoE meeting minutes were also of interest.
In the minutes the Monetary Policy Committee asserted that while the 7 per cent target would likely be reached ‘materially earlier’ than forecast, policy makers ‘saw no immediate need to raise the bank rate’ because of persistent headwinds and ‘subdued’ cost pressures.
Today’s Eurozone third quarter government debt report had little impact on the Euro, but the common currency could recoup losses against the Pound tomorrow following the release of services/manufacturing PMI reports for the Eurozone and Germany.
Euro Exchange rate Forecast
Both the services and manufacturing sectors of the Eurozone’s largest economy are expected to show a greater pace of expansion, with the German non-manufacturing gauge rising from 53.5 to 53.9 and the manufacturing measure advancing slightly from 54.3 to 54.4.
The Eurozone is also forecast to show moderately improved output in its two main sectors.
If the estimates prove accurate we forecast that the Euro to Pound (EUR/GBP) exchange rate could claw back today’s declines against the Pound.
Euro (EUR) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
Euro,
Euro,
Euro,
Euro,
[/table]
