GBP/EUR Will UK Wage Data Spoil Inflation Inspired Pound Rally Versus the Euro?

The pound moved in and out of positive territory versus the euro on Monday. The pound euro exchange rate finally pushed higher, in a relatively quiet session ahead of a busy week. The pair closed up 0.1% at €1.17 following a boost from the international monetary fund report, whilst euro inventors looked ahead to the European Central Bank monetary policy announcement on Thursday.

Whilst Brexit concerns weighed on demand for the pound for much of the previous session, the pound received a boost from the latest International Monetary Fund (IMF) report. The IMF published its latest world economic outlook. It suggested that the UK economy could grow at 1.4% in 2020 and 1.5% in 2021. This would be better than the growth predicted for the eurozone, where the IMF expects 1.3% and 1.4% growth respectively. However, the IMF also warned that this level of growth in the UK is conditional on a gradual transition away from the European Union.

Despite IMF optimism, recent economic data from the UK has been particularly poor.  Economic growth unexpectedly contracting in November, inflation struck a three-year low in December and dismal retail sales showed that not Christmas shopping spree materialised.

Today market participants will look ahead to UK wage growth data. Analysts are expecting to see a slowdown in wage rises in November, potentially boosting the case for a rate cut by the Bank of England when they meet on 30th January.

Will ZEW Sentiment Data Lift Euro?

Moves in the euro were muted in the previous session. With no high impacting eurozone economic data investors looked ahead to the ECB monetary policy meeting later this week. Whilst no changes to policy are expected, investors are looking towards the official start of the strategy review. The euro could experience some volatility if the ECB decide to alter the inflation target rate.

Today, investors will focus on the latest ZEW sentiment index. Analysts are expecting to see an improvement in expectations and current situation for Germany. Any signs of improvement could boost expectations that the slowdown in Europe largest economy is starting to bottom out.

 

What do these figures mean?
When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.

 

For example, it could be written:

1 GBP = 1.13990 EUR

Here, £1 is equivalent to approximately €1.14. This specifically measures the pound’s worth against the euro. If the euro amount increases in this pairing, it’s positive for the pound

.

Or, if you were looking at it the other way around:

1 EUR = 0.87271 GBP

In this example, €1 is equivalent to approximately £0.87. This measures the euro’s worth versus the British pound. If the sterling number gets larger, it’s good news for the euro.

 


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