- Pound (GBP) rose after strong labour market data
- UK inflation data due
- Euro (EUR) fell as USD strength
- German inflation data due
The Pound Euro (GBP/EUR) exchange rate is moving higher for a second straight day on Wednesday. The pair rose + 0.4% in the previous session, settling at €1.1999, around the daily high. At 05:45 UTC, GBP/EUR trades +0.08% at €1.2009.
The pound charged higher in the previous session after the UK unemployment rate fell to 4.1% in the three months to November, down from 4.2 and the lowest level since the start of the pandemic. The number of staff on payroll rose by 184,000 in December despite Omicron cases rising sharply. Meanwhile the number of job vacancies reached 1.25 million in the final quarter of the year. The data indicates that the UK jobs market is well on the road to recovery.
Today UK inflation data is in focus. Analysts forecast that UK CPI rose to 5.2% in December, up from 5.1%. This would be well above the Bank of England’s 2% target level and would mark a 30 year high. Expectations are for inflation to reach 6% by April as energy prices continue to rise and supply chain disruptions keep prices elevated
A strong labour market and high inflation paves the way for another interest rate hike by the BoE in February.
The Euro came under pressure in the previous session despite upbeat ZEW German economic sentiment. The common currency came under pressure as the US dollar pushed higher amid growing expectations that the Fed will act aggressively to rein in surging inflation. The Euro trades inversely to the US
German economic morale jumped to 51.7 in January marking a considerable upside surprise from 29.9. Economists had expected sentiment to increase to 32.00. The better-than-expected data comes amid expectations that COVID cases will fall by early summer.
Looking ahead German inflation data will be in focus. Analysts are expecting inflation the Europe’s largest economy rose to 5.3% in December, up from 5.2% in November. Despite surging inflation in Germany, the European Central Bank is not expected to raise interest rates this year.