UK Unemployment Rate Up for the First Time in 2 Years, GBP/EUR Exchange Rate Declines from Today’s Highs
The Pound Sterling to Euro (GBP/EUR) exchange rate fell from a high of 1.4238 to a low of 1.4143 after the UK’s employment figures defied economists’ forecasts.
The nation unexpectedly lost positions in the three months through May resulting in an increase in the jobless rate from 5.5% to 5.6%.
Average earnings also rose by less-than-forecast in the period, coming in at 2.8% excluding bonuses and 3.2% including bonuses.
As stated by Reuters; ‘An ONS official said he was unable to comment on whether the rise in unemployment and the fall in employment was related to Britain’s national elections held on May 7. Wednesday’s data suggested the labour market remained weaker than in previous months in June when the number of people claiming unemployment benefit rose by 7,000. It was the first increase in that measure of unemployment since October 2012.
However, after initially falling, the GBP/EUR exchange rate recovered and advanced back to 1.4245 before the close of the local session.
If today’s UK average earnings data shows an increase in wage growth, the Pound Sterling to Euro (GBP/EUR) exchange rate has the potential to return to trending in the region of its best rate of 2015.
BoE Prediction that UK Interest Rates Will Rise in Early 2016 sees Pound Sterling to Euro (GBP/EUR) Exchange Rate Trend Higher, Inflation Falls
Although the UK’s latest Consumer Price Index showed that the rate of UK inflation eased to 0.0% in June, the Pound Sterling to Euro (GBP/EUR) exchange rate romped higher over the course of the European session.
The pairing’s uptrend was triggered by Bank of England (BoE) Governor Mark Carney commenting on the subject of the timeline for raising interest rates.
Carney indicated that the BoE isn’t waiting for the Fed to strike first and that borrowing costs could increase in the first quarter of 2016.
Carney stated; ‘The point at which interest rates may begin to rise is moving closer. Once rates begin to adjust, we expect for those adjustments to be at a gradual pace and to a limited extent.’
He went on to note that the UK’s current low inflationary climate is largely the result of European contagion and not a reflection of underlying economic weakness in the UK.
On the subject of Greece, Carney observed; ‘What’s embedded in that statement will require Herculean efforts from all sides. The scale of structural reforms, the scale of fiscal adjustment, the scale of privatisation that will ultimately be required are significant. The process by which this agreement was struck, the nature of the agreement, the scale of the challenge underscore the number of institutional shortcomings that still exist with European Monetary Union.’
The Pound Sterling to Euro (GBP/EUR) exchange rate rallied all the way beyond 1.42 in response to the commentary.
Euro (EUR) Exchange Rate Forecast to Fall against British Pound (EUR/GBP) and US Dollar (EUR/USD) as Greek Parliament Discusses Bailout Deal
Later today we’ll find out whether the Greek parliament is prepared to accept, and implement, the heavily criticised list of extensive reform measures proposed by the nation’s creditors.
Acceptance would take Greece a step closer to unlocking vital funding and could finally put the ghost of a Greek exit from the Eurozone to rest.
However, should the left-wingers win the day and the government refuse to adopt measures 61% of the public voted against in the recent referendum, the Hellenic nation’s place in the currency bloc will be in jeopardy once more and the Euro could tumble against both the Pound (EUR/GBP) and US Dollar (EUR/USD).
The common currency was trending in a narrow range against the Pound this morning as investors looked ahead to today’s employment numbers, but demand for the common currency was hardly lifted by recent remarks from German Finance Minister Wolfgang Schaeuble.
Schaeuble was quoted as saying; ‘Some people in the government are of the view that [a Grexit] would be, or could be the better solution for Greece and its people, but of course under the condition that the decision on this is taken by Greece.’
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: UK Unemployment, Wage Growth Figures Ahead, ECB Policy Announcement Looms
The direction taken by the Pound Sterling to Euro (GBP/EUR) exchange rate in the hours ahead will largely depend on the UK’s employment data and any news from Greece.
The UK unemployment rate is believed to have held firm at 5.5% in the three months through May, but average earnings excluding bonuses are projected to have increased to 3.0% in the period from 2.7% in the three months through April.
A solid uptick in wage growth would bolster those recently raised UK interest rate hike expectations and help the Pound trend higher across the board.
While Greece is still very much the word, investors with an interest in the GBP/EUR currency pair will also be looking ahead to tomorrow’s European Central Bank (ECB) interest rate announcement.
The Pound Sterling to Euro (GBP/EUR) exchange rate achieved a high of 1.4238 today, the Euro to Pound Sterling (EUR/GBP) exchange rate fell to a low of 0.7019, the Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.5645 and the US Dollar to Pound Sterling (USD/GBP) exchange rate was trending in the region of 0.6391.