GBP/EUR: UK GDP & EU Inflation Impacts Pound vs Euro
  • Pound (GBP) steady ahead of GDP reading
  • UK unemployment declined to 4.7%
  • Euro (EUR) rose on Tuesday despite downward revision in GDP
  • Eurozone CPI in focus

The Pound Euro (GBP/EUR) exchange rate is treading water after booking mild losses in the previous session. The pair settled -0.2% lower on Tuesday at €1.1731 in quiet trade ahead of a busy week. At 05:45 UTC, GBP/EUR trades 1 pip lower at €1.1730.

The Pound lost ground in the previous session despite encouraging UK employment data. The UK saw 95,0000 new payrolls in May, well above 25,000 in April and ahead of the 75,000 forecast. The rate of unemployment also unexpectedly improved to 4.7% in June, down from 4.8% in May.

The rate of unemployment fell as the economy reopened and businesses ramped up. Skyrocketing demand ha resulted in a record number of vacancies were recorded. Separately the number of people on furlough fell to 2 million.

With demand for workers rising wage growth also jumped higher, up 8.8% year on year including bonuses. However, it is worth keeping in mind that the high figure is partly due to a favorable comparison from last year. That said it is still elevated. Bank of England Governor Andrew Bailey sees this figure cooling as the after the reopening phase.

Attention will now turn to inflation as measured by the consumer price index. Expectations are for inflation to ease slightly to 2.3%, down from 2.5% in June. Core CPI is also expected to ease to2.2% down from 2.3%.

Meanwhile, the Euro managed to rebound on Tuesday despite a downward revision in GDP for the second quarter. The second estimate saw the GDP coming in at 13.6% year on year down from 13.7%. The quarterly GDP remained steady at 2%.

Today attention is on the Eurozone inflation reading. On an annual basis CPI is expected to tick higher to 2.2%, up from 1.9%. On a monthly basis CPI is expected to slip to 0.7%, down from 0.9%. A stronger than forecast reading could boost the Euro.