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Forecast: UK Job Data to Weigh on Pound Euro Exchange Rate Through Thursday

  • Pound to Euro Exchange Rate Falls from 1.18 – Trending below best 2017 levels
  • Sterling Edges Up on Monday – Eurozone political concerns weigh on Euro
  • UK Jobs Disappoint – Wage growth slows and increases growth concerns
  • ForecastUK Retail Sales on Friday – GBP EUR trade to be quiet on Thursday

The Pound to Euro exchange rate trended with a modest downside bias for most of Wednesday’s European session. The pair comfortably remained above 1.17 however, as a weak Euro kept Sterling buoyed.

The Euro was weakened further when American markets opened on Wednesday, as the day’s US inflation and retail sales results were highly impressive to traders, strengthening the US Dollar (USD).

GBP EUR movement is unlikely to be highly volatile on Thursday, due to a lack of influential UK or EU data set for publication.

Sterling could advance slightly during this quiet session if Eurozone political concerns remain at the forefront of Euro trade trends.

Ultimately, GBP EUR investors will be focusing on Friday’s January UK retail sales results for the next big Pound movement.

[Previously updated 13:40 GMT 15/02/2017]

The Pound to Euro exchange rate edged back towards the week’s opening level on Wednesday.

The day’s UK job stats disappointed investors, leaving the Pound weaker once again. While jobless claims beat projections and a solid number of new jobs for made for the three months into December, wage growth slowed and concerned traders.

UK wage growth was expected to hold at 2.8% including bonuses and 2.7% without. Unfortunately, the prints fell to 2.6% in both.

Due to slowing wage growth and increasing consumer prices in 2017, analysts predict UK citizens will be financially squeezed later in the year.

This is likely to have an adverse effect on retail sales, one of Britain’s most vital sectors for growth.

2017’s first retail sales results are due for publication on Friday.

[Previously updated 16:52 GMT 14/02/2017]

The Pound Euro exchange rate recovered from its worst daily levels on Tuesday afternoon after falling back to the week’s opening levels earlier in the day.

The next key point for GBP EUR traders will be Wednesday’s UK jobless claims and employment results.

If January jobless claims come in worse than expected, it could worsen concerns that UK citizens and jobs will struggle to cope with the Brexit transition period.

The day will also see the publication of December’s Eurozone trade surplus. However, this is unlikely to be as influential to GBP EUR as Britain’s labour stats.

[Previously updated 12:45 GMT 14/02/2017]

The Pound to Euro exchange rate could have seen even worse performance on Tuesday if the day’s Eurozone growth results had impressed traders.

Germany’s preliminary Q4 Gross Domestic Product (GDP) figures came in at 1.2% year-on-year. This highly disappointed investors hoping for the previous figure of 1.5% to improve to 1.7%.

The slower-than-expected German figures also held up the overall Eurozone bloc’s GDP results. Yearly growth in the bloc remained at 1.7%, missing an increase to 1.8%.

February’s economic sentiment survey results from ZEW also disappointed investors. Germany’s economic sentiment index fell from 16.6 to 10.4, while the Eurozone’s slumped from 23.2 to 17.1.

[Previously updated 10:23 GMT 14/02/2017]

With the UK’s gauge of inflation coming in below forecasts on Tuesday, the Pound Euro exchange rate fell from its best levels.

Before the report was released hopes that spiking consumer price pressures would push the Bank of England (BoE) into raising interest rates sooner than currently planned saw the GBP EUR pairing push beyond 1.18 – hitting a high of 1.1822.

However, while the rate of annual inflation increased, it failed to rise by as much as expected and the Pound swiftly fell back against the Euro and US Dollar.

The GBP EUR exchange rate dipped to 1.1738.

That being said, the rate of inflation was still the highest since 2014.

When speaking to The Independent, investment Director Tom Stevenson noted; ‘With Britain seemingly heading for a hard Brexit, it’s likely we will see the pound continue to wobble over the next two years, resulting in higher inflation in the short term. Indeed, price rises are expected to reach 2.8 per cent by the end of the year.’

[Previously updated 09:15 14/02/2017]

A slew of vital Eurozone datasets today, as well as a few influential UK stats, have strong potential to cause shifts in the Pound to Euro exchange rate.

Before the release of the UK’s Consumer Price Index, the Pound Euro exchange rate pushed above the 1.18 level. Whether or not it climbs higher still in the hours ahead largely depends on how strongly UK inflation data comes in. If the rate of consumer price pressures is shown to be climbing more rapidly than anticipated, it could pressure the Bank of England (BoE) to reconsider its wait-and-see stance on interest rates. Any hints that borrowing costs could be increased in 2017 are liable to send the Pound trending higher.

Key preliminary Gross Domestic Product (GDP) figures will be published across the Eurozone today, which are likely to have a notable effect on the Euro.

Germany’s Q4 GDP figures will be published first, followed by Italy’s and the Eurozone’s overall Q4 growth projections later in the morning.

The Euro is also likely to be influenced by Germany’s finalised January Consumer Price Index (CPI) results, which publish alongside Germany’s Q4 growth results.

The Eurozone economy’s stats have been beating economist expectations in recent months, but the European Central Bank (ECB) has remained dovish.

Investors are hoping that the ECB will be pressured into a more hawkish stance if Eurozone economic activity continues to improve. This would bolster Euro demand, making Tuesday’s session a vital one.

Inflation data for Britain will also be published on Tuesday. The Pound is likely to advance if January’s CPI results beat expectations, as this would cause Bank of England (BoE) interest rate hike bets to increase.

The BoE has taken a very cautious tone in recent months due to concerns that the Brexit process will cause economic instability. A cautious BoE has typically opted to overlook surges in inflation. This hasn’t stopped investors from hoping high CPI could pressure the BoE into changing its mind.

Other data to look out for in the coming days includes ZEW’s economic sentiment surveys for Germany and the Eurozone, as well as the Eurozone’s December trade surplus report.

On Wednesday, GBP traders will pay particularly close attention to UK jobless claims from January and employment results from the three months into December 2016.

On Monday the Pound to Euro exchange rate trended in the region of 1.17 while the Euro to Pound exchange rate traded at around 0.84.

GBP EUR saw a modest advance on Monday due to weakness in the Euro, caused by ongoing concerns that nationalist politics could become more popular in the Eurozone.

General elections are set to take place in various Eurozone countries throughout 2017, including France, The Netherlands and Germany.

Far-right French Presidential candidate Marine Le Pen has seen increased popularity in recent months. This has caused Euro traders to grow concerned that she will pull France out of the Eurozone if she becomes President.

These concerns kept the Euro weighed down last week and continued to do so on Monday, despite higher growth forecasts for the Eurozone from the European Commission (EC).

The EC raised its Eurozone growth outlook from 1.5% to 1.6% in its fresh 2017 forecast, while it expects British growth to slow to 1.5% this year due to the Brexit process.

In its UK forecast, the EC states;

‘The impact of the vote by the UK to leave the EU in the referendum held on 23 June 2016 on growth has yet to be felt….

Recent momentum is projected to largely continue in the first quarter…[but] ease notably thereafter.’

Despite this optimism in Eurozone growth, the Pound to Euro exchange rate continued to benefit from last week’s UK ecostats.

Last Friday saw the publication of Britain’s December trade deficit update, which unexpectedly lightened from -£3.56b to -£3.30b.

December’s UK manufacturing and industrial production results also impressed investors. Year-on-year figures improved from 1.7% and 2.2% to 4% and 4.3% respectively.

Analysts believe that these better-than-forecast private sector figures improve the outlook for Britain’s Q4 2016 Gross Domestic Product (GDP) results.