- Pound (GBP) looks to UK inflation figures
- Strong wage growth of 6.7% lifted GBP yesterday
- Euro (EUR) fell despite avoiding recession
- Eurozone industrial output data is due
The Pound Euro (GBP/EUR) exchange rate is holding steady after two days of gains. The pair rose 0.19% in the previous session settling on Tuesday at €1.1339, after trading in a range between €1.1301 – €1.1359. At 05:45 UTC, GBP/EUR trades +0.00% at €1.1339.
The pound pushed higher yesterday after data revealed a strong UK labour market. Unemployment help they have expected at 3.7% in the three months to December, just 0.2% higher than the historical low of 3.5 reached in the summer.
Meanwhile, the tight labour market is exacting pressure on wages, and growth of regular pay rose 6.7% annually in the final three months of the year, up from 6.5%. This was higher than the 6.5% forecast by economists time was the strongest increase and pay since records began in 2001. Bank of England is likely to be increasingly concerned by higher wages which create inflationary pressures.
Inflation data is due out today and is expected to show that consumer prices cooled slightly in January 10.3%, down from 10.5%. Meanwhile, core inflation, which strips out more volatile items such as food and fuel, is expected to take lower to 6.2% from 6.3%.
With inflation cooling only very slowly pressure and will wages rising, pressure remains on the BoE to keep raising interest rates.
The euro edged lower in the previous session despite data revealing that the eurozone economy avoided a contraction in the final three months of 2022. Fourth quarter GDP rose 0.1% quarter on quarter. This was in line with the preliminary reading but down from 0.3% growth in the third quarter.
Looking ahead today, attention will be on eurozone industrial production, which is expected to fall 0.8% month on month in December after rising 1% in November.
In addition to data, attention will also be on European Central Bank president Christine Lagarde who is due to speak.
