- Pound (GBP) advanced in the previous session after inflation surged higher
- Investors now look towards UK labour market data, which is expected to still be holding up reasonably well thanks t the government job retention scheme
- Euro (EUR) investors turn full attention to European Central Bank, which is not expected to act
- EU leaders’ summit on Friday could decide fate of the EU recovery fund
The Pound Euro exchange rate (GBP/EUR) is slipping lower. The pair settled higher on Wednesday +0.2% at €1.1031. At 05:15 UTC, GBP/EUR trades -0.1% at €1.1009.
The Pound traded on the front foot in the previous session after upbeat inflation data. Consumer prices jumped 0.6%, unexpectedly increasing from May’s 0.5%. The data showed that as the UK economy gradually started reopening, demand picked up, boosting prices, particularly in clothing, footwear and recreational activities.
Investors will now look ahead to labour market data. Analysts are expecting the numbers to show just a very slight increase in the unemployment rate to 4.2%, up from 3.9%. The data is also expected to show that the number of people claiming unemployment benefit climbed by 250,000 in June, down from May’s 528,900.
The labour market data is expected to hold up relatively well for another month because the government job retention scheme clouds the picture. Only when the retention scheme starts to taper as from August will the true impact of the coronavirus crisis on the labour market become more apparent.
Interestingly Bank of England policy maker Silvana Tenreyo believe that the UK economic recovery will be an incomplete V. She considered that unemployment and social distancing could lead to weaker demand.
The Euro slipped lower versus the Pound, but it traded broadly higher versus other major peers, supported by risk sentiment and upbeat recent data from the region.
Attention today will turn towards the European Central Bank monetary rate decision. The central bank is not expected to move on policy after increasing the Pandemic Emergency Purchase Programme by a more than expected €600 billion last month and after talking about signs of recovery in the economy.
Instead Euro investors will be hoping for an agreement by EU leaders at the leaders summit over the recovery fund.