- Pound (GBP) consolidates gains
- UK unemployment hit 5 year high
- Euro (EUR) slipped yesterday on ECB exchange rate concerns
- German consumer confidence expected to decline
The Pound Euro (GBP/EUR) exchange rate is extending gains for a third straight session. The pair settled +0.3% higher on Tuesday at €1.1295, after briefly piercing €1.13. At 05:15 UTC, GBP/EUR trades just 2 pips higher at €1.1297.
The Pound found strength in the previous session after better than forecast UK labour market data. The ILO unemployment rate for the 3 months to November rose to 5% for the first time in over 4 years, up from 4.9%. However, given the scale of the economic shock that the country experienced this is still a low number, and better than the 5.1% expected. The claimant count only rose by 7,000 significantly lower than the 35,000 forecast.
With no economic data due to be released today covid developments will remain in focus. The UK has crossed a grim milestone with over 100,000 deaths recorded from the virus. Meanwhile the vaccine programme continues to accelerate with 6.8 million people in the UK now vaccinated. The widespread distribution of the vaccine is closely tied to the reopening of the economy and the speed of the economic recovery.
The Euro came under pressure on Tuesday following a report that the European Central Bank (ECB) is concerned over the exchange rate. The central bank is said to be querying US Dollar weakness despite the strength of the US economy and mulling over a potential study of the impact of ECB versus Federal Reserve policy on exchange rates.
The headlines sent the Euro sharply lower across the board. This is certainly not the first time that the ECB have raised concerns over the exchange rate. Although in the latest ECB meeting comments regarding the strength of the Euro were in fact quite restrained compared to what the market was expecting were actually.
Attention will now turn to German GFK consumer confidence figures. Analysts expect confidence to deteriorate in February from -7.3 to -7.9.