- Pound (GBP) lifted reopening optimism
- UK claimant count unexpectedly decreased -20k
- Euro (EUR) pressurized by stronger USD
- Q4 German GDP 2nd reading in focus
The Pound Euro (GBP/EUR) exchange rate is extending gains for an eighth straight session. The pair settled +0.45% higher on Tuesday at €1.1618 at the high of the day and the highest level since March 2020. At 05:15 UTC, GBP/EUR trades +0.4% at €1.1664 after hitting a fresh 12 month high of €1.1708. The pair is has already gained almost 3% so far through February.
The Pound surged in the previous session, boosted by Prime Minister Boris Johnson’s reopening plan and by better than forecast labour market data.
On Monday the PM set out the roadmap to reopen the UK economy. The rapid vaccine rollout and harsh lockdown conditions has seen the number of new daily covid cases drop to just over 8000. The prospect of the UK economy opening over the coming months is boosting the probability of a return to growth.
UK unemployment rose to 5.1% in the three months to December. This was the highest level in almost 5 years as the economic toll from the pandemic continued to build. Yet despite tick higher in the unemployment level, the claimant count – so the number of people who signed up for unemployment benefits actually dropped by 20,000 an early sign of stability. Further the average wage also jumped higher to 4.7%. This was well above the 4.2% forecast by analysts.
There is no high impacting UK data today. Instead investors will be watching as Bank of England Governor Andrew Bailey testifies before lawmakers.
The Euro traded on the back foot on Tuesday, thanks in part to US Dollar strength. Eurozone inflation data was without surprise. CPI increased 0.2% month on month in January, inline with the initial reading.
Attention will now turn to German GDP for the fourth quarter. This is the second reading, so it is only expected to move the market significantly if it is notably away from the first reading of 0.1%.