- Pound (GBP) rises after risk sentiment rebounded on Monday
- UK unemployment expected to hold steady at 4.1%
- Euro (EUR) falls on ECB’s Lagarde’s dovish tone
- Eurozone GDP & German ZEW sentiment data due
The Pound Euro (GBP/EUR) exchange rate is edging a few pips lower, snapping a three day winning run. The pound rose 0.13% on Monday, settling at €1.1960 towards the high of the day. At 05:45 UTC, GBP/EUR trades -0.03% at €1.1956
After a shaky start to trading on Monday, the pound recovered from its earlier losses and managed to finish the day on higher ground. The turnaround in the pound’s fortunes came as fears of Russian invasion into Ukraine eased, boosting risk sentiment and demand for the pound.
Vladimir Putin has signaled that Russia will continue talks with US and NATO whilst ending some drills being carried out by some of the 130,000 Russian troops amassed on the border. This suggests that Russia has stepped back from an immediate invasion. The update comes after Russian’s foreign mister Lavrov says that the West has made some constructive proposal.
Looking head investors will continue to monitor developments between Russia and Ukraine. However, attention will also turn back towards the UK economic calendar with the release of UK jobs data. Expectations are for the labour market recovery to have continued.
Expectations are for unemployment rate to stay steady at 4.2%. Average wages excluding bonuses are expected to slip lower to 3.8% and the number of people claiming unemployment benefits is also forecast to continue falling by 28k, after falling by 43,300 in December.
The euro fell in the previous session partly owing to the strong US Dollar. The US Dollar rose on growing expectations that the Fed will move aggressively to raise interest rates. This is in clear divergence from the European Central Bank. ECB President Christine Lagarde, said in a speech that the central bank is in no rush to start tightening policy and will only do so gradually.
Today there is plenty of data to attract investors’ attention including Eurozone Q4 GDP, second estimate and German ZEW sentiment data. The eurozone economy is expected to have grown 0.3% in the final three months of the year
