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Daily Pound Update: GBP/EUR Exchange Rate Slides on UK Wages Letdown

Falling unemployment has done nothing to help the Pound today, with the GBP/EUR exchange rate dropping by -0.3% on wage data.

  • GBP EUR rate slips to 1.1067 – EUR GBP trades up at 0.9032
  • Pound down after wage upset – UK wage squeeze remains in force
  • Euro up on industrial figures – Higher Q3 GDP forecast
  • Pound volatility likely on BoE meeting – Euro may move on ECB speeches

The Pound to Euro dip seen today has started a reversal of yesterday’s GBP/EUR rise, which was triggered by UK inflation hitting 2.9%.

Pound Drops Off on Unchanged Wage Figures

Quickly erasing the prior advance caused by rising inflation, today’s UK wage growth figures have undeniably disappointed Pound traders.

In July, average UK wages have reprinted at 2.1%, both with and without bonuses included.

This has meant that the UK continues to suffer from declining real incomes, as part of the wage squeeze that has been hitting consumers for months now.

The other headline news was that UK unemployment has fallen to 4.3%, the lowest reported rate in 42 years.

While good news on paper, any support fell flat because of fears that the drop was due to the unstable ‘gig economy’. Highlighting the issue of more people with jobs clashing with lower real incomes, ONS Statistician Matt Hughes said;

‘Despite earnings rising by 2.1% in cash terms over the last year, the real value of people’s earnings is down 0.4%’.

Euro Advances after Industrial Production Picks Up

The Euro has risen to an exchange rate of 0.9032 against the Pound today, following better-than-forecast industrial production figures.

Covering the entire Eurozone, these showed output rising to 3.2% on the year in July, while the monthly figure also returned to a growth range.

This brought an optimistic projection from research company Pantheon Macroeconomics;

‘Stronger production in France and Italy offset small declines in Spain and Germany.

Base effects are challenging for the quarterly rate in Q3, but survey data suggest that yearly growth is accelerating, and we are confident that manufacturing will support GDP growth in Q3’.

Thursday’s Economic Outlook: Pound Set for Turbulence on BoE News

The main event on Thursday will be the Bank of England (BoE) policy meeting, which takes place at noon.

The UK central bank is expected to leave interest rates on hold, but may give some insight into when rates could rise in the future.

If more than two policymakers support higher UK interest rates then the Pound could rally, although BoE Governor Mark Carney could erase any GBP/EUR gains if he has a dovish outlook.

Thursday’s Eurozone news will consist of a pair of speeches made by European Central Bank (ECB) official Yves Mersch. Mersch will be giving two addresses in Estonia, which may touch on ECB monetary policy.

Current Interbank GBP EUR Exchange Rates

At the time of writing, the Pound to Euro (GBP EUR) exchange rate was trading at 1.1067 and the Euro to Pound (EUR GBP) exchange rate was trading at 0.9032.