GBP/EUR Exchange Rate Sinks despite Strong UK Wage Growth
The Pound Euro (GBP/EUR) exchange rate continued to drift lower this morning as some upbeat UK economic data failed to lift the current gloom surrounding Sterling.
At the time of writing, the GBP/EUR exchange rate is down roughly 0.3% this morning, with the pairing sliding to a six-month low at €1.1075.
Sterling (GBP) Selling Bias Persists in Spite of Robust UK Employment Figures
The Pound (GBP) is on the defensive against the Euro (EUR) and the majority of its other peers this morning, in spite of some robust UK employment figures.
According to data published by the Office for National Statistics (ONS), unemployment in the UK held at 3.8% in May, the lowest jobless rate since 1974.
This was accompanied by the latest earning figures, which saw wage growth (excluding bonuses) climb from 3.4% to 3.6% over the same period, beating expectations of a more modest rise to 3.5% and striking its highest levels in over a decade and offering support to the UK economy.
Tej Parikh, Chief Economist at the Institute of Directors, said:
‘The labour market continues to be the UK economy’s strong suit, amid ongoing uncertainty. High employment has provided uplift to household incomes, which has supported the economy in a particularly challenging period.’
However the positive labour figures weren’t enough to lift the heavy selling bias that currently hangs over the Pound driven by heightened Brexit uncertainties and expectations of monetary easing from the Bank of England (BoE) this year, leaving the GBP/EUR exchange rate to strike a new six-month low.
Euro (EUR) Gains Tempered by Eurozone Gloom
At the same time, the Euro (EUR) has found its gains against the Pound (GBP) trimmed this morning by the publication of the latest ZEW economic sentiment indexes.
The latest Eurozone index revealed that sentiment in the block continued to deteriorate this month, with the index striking its lowest levels since January.
Unsurprisingly fears over trade and slowing global growth were the main gripes this month, with chatter of a possible rate cut from the European Central Bank (ECB) also dragging on sentiment.
GBP/EUR Exchange Rate Forecast: Will a Dovish Carney Extend the Pound’s Losses?
Looking ahead, we may see fresh selling impetus in the Pound to Euro (GBP/EUR) exchange rate later this afternoon following a speech by BoE Governor Mark Carney.
Carney’s speech comes amid rising speculation that the BoE could ease its monetary policy this year to help cushion the UK economy against a global slowdown and the challenges of a potential no-deal Brexit.
Should Carney drop any hints that the BoE could cut interest rates by the end of the year, then we expect to see the recent Sterling sell-off accelerate.
Meanwhile, the focus for ECB investors is likely to turn to a speech by the ECB’s Benoît Cœuré tomorrow morning, with the Euro also likely to face some headwinds if Cœuré’s remarks fuel ECB stimulus expectations.
