- Pound (GBP) boosted by strong UK labour market data
- BoE could raise rates sooner than expected, GDP in focus
- Euro (EUR) under pressure after weak German & EZ business sentiment data
- German CPI data due
The Pound Euro (GBP/EUR) exchange rate is ticking higher on Wednesday, building on small gains from the previous session. The pair settled +0.06% higher on Tuesday at €1.1774 after briefly rising above €1.1800 again. At 05:45 UTC, GBP/EUR trades +0.1% at €1.1786.
The Pound pushed high in the previous session boosted UK jobs hitting a record high. The latest data from the Office of National Statistics revealed that 235,000 jobs were added to the UK in July, the most on record. The number of people in employment is now back at pre-pandemic 2020 levels.
The level of unemployment also ticked lower to 4.5%, down from 4.6%. The upbeat data comes as the government’s furlough scheme drew to a close and could potentially encourage the Bank of England to raise interest rates sooner amid elevated inflation.
Inflation is expected to rise to over 4% by the end of the year amid the energy crisis, supply chain disruptions and labour shortages. Given that these factors are showing no signs of easing, elevated inflation could in fact be around for much longer than previously expected.
Attention will now turn to UK GDP the monthly average in August. Expectations are for a slowdown in economic growth to 3% from 3.6%. A largest than forecast slowdown could unnerve the markets, particularly with inflation so high.
The Euro came under pressure after the ZEW economic sentiment data revealed that business morale in Germany and the Eurozone as a whole tanked sharply lower in October.
Rising energy prices, supply chain disruptions are growing dragging sentiment in Germany lower for a fifth straight month. Good news from Germany has been sparse in recent weeks, with these numbers coming after weak industrial production numbers, factory orders and inflation remains elevated.
German inflation data for Germany is due today and is expected to show consumer prices remain elevated rising to 4.1%.