The Euro (EUR) strengthened broadly against the Pound (GBP) on Wednesday after the UK currency was dragged lower by the release of weaker-than-forecast wage growth data.
Earlier in the session, the single currency had been weaker against Sterling as Tuesday’s dire ZEW confidence data continued to weigh heavily and as a report released on Wednesday showed that industrial production across the Eurozone declined for a second consecutive month in June.
According to the European Union Statistics Agency Eurostat, output from the region declined by 0.3% from May and was stagnate at 0% from the previous year.
‘This is a very disappointing figure after the already strong contraction in May, For the quarter as whole, industrial production contracted by 0.4 per cent, which doesn’t bode well for second quarter GDP growth to be published tomorrow (where) a growth figure of 0.2 per cent now seems to be out of reach,’ said an analyst from ING Bank.
Concerns over Thursdays GDP data and the situation in Ukraine also weighed upon the currency.
Because of the data, the Euro slumped to a new nine-month low against the US Dollar.
‘The Euro is going to slowly lose ground. US monetary policy is slowly normalising whilst the ECB are moving in the opposite direction. It is difficult to be constructive about the Euro’s immediate prospects,’ Said a senior currency strategist at Commerzbank AG.
Sterling declined against all of its most traded peers after data released by the UK’s Office for National Statistics showed that wage growth fell unexpectedly in the second quarter of the year.
Wages declined even as the nation’s unemployment fell yet again to 6.4%.
The number of people claiming unemployment benefits fell by 33,600 last month, beating expectations for a decline of 30,000.
June’s figure was revised to a drop of 39,500 from 36,300 previously.
“The improvement in the general economy means unemployment is set to fall further as we move through the second half of the year, with a high probability that joblessness will drop below 6% by the end of the year. There’s much less certainty, however, about wage growth,” said Chris Williamson, chief economist from Markit.
Average weekly earnings, including bonuses fell by a yearly -0.2% whilst earnings excluding bonuses fell to 0.6% from 0.7%.
The Pound then fell further after the BoE said in its inflation report that it had halved its forecast for wage growth in 2014.
Previously the Bank had said that wage growth is one of the key factors as to when interest rates will rise.
As a result of the disappointing report investors reduced their bets for a rate hike occurring before the end of the year.
Euro Exchange Rate News:
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,US Dollar,1.3353 ,
Euro,,British Pound,0.7984 ,
Euro,,Australian Dollar,1.4364 ,
Euro,,Canadian Dollar,1.4586 ,
[/table]
