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Euro pound (EUR/GBP) subdued as German unemployment holds close to three-year highs

Headquarters of the European Commission

Euro pound (EUR/GBP) changeable amid German labour concerns

The euro pound (EUR/GBP) exchange rate is trading without a clear trajectory this morning despite signs of a weakening German labour market.

At the time of writing the EUR/GBP exchange rate is trading at €0.8518, virtually unchanged from this morning’s opening rate.         

Euro (EUR) subdued despite weak labour data

The euro (EUR) is trading without a clear direction this morning following the latest German jobs data.

The unemployment rate in Germany held steady at 5.9% for a sixth consecutive month in May, hovering near multi-year highs.

Economists had forecast an increase of 10,000 newly unemployed persons; however, the number unexpectedly rose to 25,000 unemployed German citizens, bringing the total to 2.762 million, and marking a seventeenth consecutive month of rising unemployment.

Andrea Nahles, Federal Minister of Labour and Social Affairs of Germany, noted:

‘The spring recovery did not really get going this year. Improvement is still a long time coming. Due to demographic developments, many well-qualified and experienced skilled workers will continue to leave the labour market in the coming years.’

While the lacklustre release serves to hamper EUR exchange rates so far today, markets are mostly focussed on the European Central Bank’s (ECB) looming monetary policy meeting, which will take place on Thursday. The central bank is widely expected to enact its first interest rate reduction, leaving investors reluctant to place any aggressive bets in the meantime.

Pound (GBP) mixed following retail data

The pound (GBP) is struggling to attract investor support this morning against its safe-haven rivals, as a cautious market sentiment permeates global trade.

Meanwhile, the latest UK retail figures proved disappointing, indicating ongoing domestic cost-of-living pressures.

The British Retail Consortium’s (BRC) retail sales monitor rose less than forecast in May by 0.4%, climbing from the previous month’s 4.4% decline, though missing market projections of a 1.2% increase.

Helen Dickinson, Chief Executive, of the BRC, said:

‘Despite a strong bank holiday weekend for retailers, minimal improvement to weather across most of May meant only a modest rebound in retail sales last month.

Retailers remain optimistic that major events such as the Euros and the Olympics will bolster consumer confidence this summer.’

With UK data in short supply for the remainder of the session, weak consumer activity in the UK may prompt markets to reconsider their current Bank of England (BoE) interest rate cut speculations, thereby stifling the pound this afternoon.

Elsewhere, gloomy trading conditions allow GBP to rise against its riskier rivals.

Euro pound exchange rate forecast: markets eye ECB

Looking ahead, the ECB is in focus. With its latest interest rate decision due for release on Thursday, the common currency may struggle to gain ground against its peers in the meantime. While markets are widely expecting the ECB to reduce its base rate, investors will be eager to analyse the central bank’s accompanying commentary, in order to assess the likelihood of continually dovish policy in the coming months.

For the pound, a lack of more impactful releases could see the UK’s finalised services PMI pulled into focus on Wednesday. Should the index confirm slowing services activity in May, GBP may retreat further.