The Pound (GBP) has made a small advance against the Euro (EUR) today, mainly because of the Euro falling sharply.
The single currency has struggled because of the latest inflation rate readings, which have shown a Eurozone-wide slowdown.
Economists have forecast that these could only be temporary decelerations, but Euro traders have still avoided the single currency today.
(Last updated 16th May, 2018)
Tentative Growth in UK Earnings Leaves GBP/EUR Exchange Rate Steady
The Pound (GBP) has failed to get off the starting blocks against the Euro (EUR) today, having held close to opening levels.
This lack of definite movement comes after the release of UK wage data for March, which has shown that the pace of earnings growth is above the rate of inflation.
The stats weren’t entirely supportive, however, as they while wage growth without bonuses rose, wage growth with bonuses included dropped from 2.8% to 2.6%.
Lancaster University Professor of Economics Geraint Johnes saw the data as a sign that higher UK interest rates may still be a long way off:
‘This is a disappointing result, in that it represents a fall from the 2.8% figure achieved in February, and it means that we have to wait still longer for real wages to recover.
‘This … provides justification for the Bank of England’s (BoE) decision not to raise interest rates – despite the buoyancy of the employment figures, the recovery in the labour market is not there, and rising wages clearly present no threat in terms of inflation.’
Signs of Eurozone GDP Growth Slowdown Leave Euro to Pound (EUR/GBP) Exchange Rate Tight
The Euro (EUR) has failed to make significant movement against the Pound (GBP) today, having been softened by the latest Eurozone GDP data.
This has consisted of second estimates for Eurozone GDP growth in Q1 2018; the revised figures are the same as the initial readings and show expected slowdowns.
Levels of activity across the Eurozone are still forecast to have fallen from 0.7% to 0.4% on the quarter and from 2.8% to 2.5% compared to Q1 2017.
An additional drag on the Euro today has been the lack of an immediate Italian coalition announcement.
Pound to Euro (GBP/EUR) Exchange Rate Gains Forecast if Eurozone Inflation Rates Slow
For the rest of the week, the Pound to Euro (GBP/EUR) exchange rate will primarily be affected by Eurozone data, given the limited remaining UK economic events.
This situation could still prove favourable to GBP traders, however, as Wednesday’s Eurozone inflation data may devalue the Euro if it matches with forecasts.
The pace of price growth in the single currency bloc is expected to have fallen in all fields in April.
Such results will lower expectations immediate monetary policy adjustment from the European Central Bank (ECB) and could spark a sharp EUR/GBP decline.
Pound to Euro trading could be favourable on Thursday, as Eurozone construction data will be released, followed by a speech from a Bank of England (BoE) official.
In the former case, Eurozone construction output is forecast to have risen by 1.5% in March 2018 compared to March 2017, which could spark Euro gains.
The UK event will be a speech from BoE Chief Economist Andy Haldane, who will be discussing the effects of monetary policy on GDP growth.
If Mr Haldane suggests that UK interest rates could rise this year, the Pound to Euro (GBP/EUR) exchange rate could advance.