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Pound Euro Exchange Rate News: GBP/EUR Firms as UK Wage Growth Accelerates

GBP/EUR Exchange Rate Lifted by UK Employment Figures

The Pound Euro (GBP/EUR) exchange rate ticked higher on Tuesday as markets welcomed the publication of some stronger-than-expected UK wage growth figures.

At the time of writing, the GBP/EUR exchange rate firmed this morning, with the pairing pushing away from a four-month low to reach €1.1231.

Pound (GBP) Buoyed by UK Wage Growth Figures

The Pound (GBP) is trending higher against the Euro (EUR) and the majority of its other peers this morning as markets cheer the release of the UK’s latest employment report.

According to data published by the Office for National Statistics (ONS) the UK’s unemployment rate remained at 3.8% in April, its lowest levels since 1974.

Spurring the upswing Sterling however was the accompanying earning’s figures, with wage growth (excluding bonuses) unexpectedly accelerating from 3.3% top 3.4% over the same period, beating forecasts it would slow to just 3.1%.

Analysts suggest this resilience in wage growth will likely act as another incentive for the Bank of England (BoE) to raise interest rates, adding support to a warning from BoE Governor Mark Carney last month that rates are likely to rise faster-than-expected by markets.

However some analysts were wary about the pace of employment growth, which fell to its lowest levels since August and stoked concerns that the labour market may be slowing.

Tej Parikh, chief economist at the Institute of Directors warns:

‘The employment boom cannot last forever, and is certainly showing signs of softening. Business leaders are finding it harder to recruit as the supply of talent shrinks, and wage growth has failed to sustain the heights we saw earlier this year.’

GBP/EUR Exchange Rate Forecast: Draghi to Comment on ECB Rate Cut Speculation?

Looking ahead, movement in the Pound Euro (GBP/EUR) exchange rate is likely to be centred on a speech by European Central Bank (ECB) President Mario Draghi.

Recent reports suggest that members of the ECB are flirting with the idea of lowering interest rates if growth and inflation in the Eurozone continues to slow, so EUR investors will be watching Draghi closely for any hints that there may be some truth to this.

This will be followed by the publication of the Eurozone’s latest industrial production figures on Thursday, which could send the Euro lower if the collapse in German factory output leads to a larger-than-expected slump in production in April.

In the meantime, GBP investors face the prospect of heightened political uncertainty in the UK as the Conservative leadership contest gets into full swing.

This is likely to result in increased volatility in the Pound as markets speculate on who will replace Theresa May as PM and what impact this could have on Brexit.