Pound to Euro Rate Ticks Up following UK Jobs and German CPI Data

September 11, 2024 - Written by John Cameron

STORY LINK Pound to Euro Rate Ticks Up following UK Jobs and German CPI Data

The Pound Euro (GBP/EUR) exchange rate edged higher on Tuesday following the publication of the UK’s latest employment data alongside Germany’s finalised inflation reading.

The Pound (GBP) drifted higher against most major currencies on Tuesday following the release of the UK's latest labor market data.

The unemployment rate dropped to 4.1% in July, down from 4.2%, while average earnings (excluding bonuses) eased from 5.4% to 5.1%, a less sharp decline than the expected 4.9% reading.

Despite indications of continued wage growth, the Pound remained resilient as markets stayed optimistic that the Bank of England (BoE) would maintain its current interest rate during its upcoming decision next week.

Richard Carter, Head of Fixed Interest Research at Quilter Cheviot, commented:

‘Though wage growth is coming down, it remains significantly higher than the Bank’s 2% inflation target. In real terms, average regular earnings are rising by 2.9%. While this may help buoy consumer confidence, it will still be of some concern to the BoE. The Bank of England’s next interest rate decision is now just over a week away, and today’s data, alongside the inflation and GDP prints due out before it meets, will no doubt play a major role in whether it opts to reduce rates further or hold for now.’

The Euro (EUR) is encountering new challenges this morning after Germany's finalised consumer price index (CPI) for August was released.

The data confirmed that inflation has dropped below the European Central Bank's (ECB) 2% target, decreasing from 2.3% to 1.9%.

As inflation in the Eurozone’s largest economy continues to decline, speculation regarding a potential interest rate cut by the ECB has intensified.

With the central bank’s decision just two days away, this uncertainty is weighing on EUR exchange rates.

President of the Federal Statistical Office Ruth Brand commented: ‘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.’

GBP/EUR Exchange Rate Forecast: UK GDP in the Spotlight

Looking ahead, a key focus for the Pound Euro exchange rate on Wednesday will be the release of the UK’s latest GDP figures.

The data is expected to reveal 0.2% growth in the British economy for July, which could offer some support to GBP exchange rates.

Meanwhile, the Euro may see volatility on Thursday as the European Central Bank (ECB) announces its latest interest rate decision.

With a 25-basis point cut already widely anticipated, the single currency could slip should the ECB choose to enact its rate cut.

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TAGS: Pound Euro Forecasts