Euro pound (EUR/GBP) pressured by UK employment release
The euro pound (EUR/GBP) exchange rate is losing ground today following the latest batch of UK employment data.
At the time of writing the EUR/GBP exchange rate is trading at €0.8427, down approximately 0.2% from this morning’s opening rate.
Pound (GBP) buoyed by employment uptick
The pound (GBP) saw an initial uptick this morning following the release of the latest employment data from the UK. The figures showed a drop in the unemployment rate for July to 4.1%, aligning with predictions and marking a decrease from earlier highs this year.
However, the average earnings data presented a mixed picture. Including bonuses, average earnings for the three months to July slowed to 4%, down from a revised 4.6% and slightly below the expected 4.1%. Excluding bonuses, wage growth also decelerated to 5.1%, meeting forecasts but still reflecting a slowdown from the previous 5.4%.
This persistent wage growth has been a point of concern for the Bank of England (BoE) policymakers, who fear that sustained high earnings could maintain pressure on broader price levels, complicating the bank’s efforts to control inflation.
Liz McKeown, Director of Economic Statistics at the ONS said:
‘Growth in total pay has slowed markedly again as one-off payments made to many public sector workers in June and July last year continue to affect the figures.
‘Basic pay growth also continued to slow, though less sharply.’
Given these dynamics, the pound’s potential gains might be restrained today, amid growing expectations that the BoE might adopt a more aggressive easing stance in its upcoming policy decisions.
Euro (EUR) pressured by growing ECB rate cut bets
The euro (EUR) faces headwinds today following confirmation of rapidly easing price pressures in the Eurozone’s largest economy.
Germany finalised consumer price index revealed that inflation eased as forecast to 1.9% in August, down from the previous 2.3%, and as a result positioning it below the European Central Bank’s (ECB) target of 2%.
This development in Germany has intensified speculation about potential ECB interest rate cuts, especially with the ECB’s decision looming just two days away.
Ruth Brand, President of the Federal Statistical Office, remarked on the inflation trends:
‘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.’
This mixed inflation landscape is setting the stage for a critical assessment at the upcoming ECB meeting, and deterring investor interest in EUR today.
Euro pound exchange rate forecast: UK GDP in spotlight
Moving forward, the UK’s latest GDP figures will likely be the key driver for the EUR/GBP exchange rate tomorrow. The data, expected to show a 0.2% growth in the British economy for July, could provide some support to the pound if it aligns with forecasts.
On the euro side, attention is turning towards the European Central Bank’s interest rate decision scheduled for Thursday. This event is poised to introduce significant fluctuations in the euro’s value against its counterparts. With a 25-basis point reduction largely anticipated by the market, the euro could face downward pressure if the ECB’s decision meets these expectations.