• Pound (GBP) awaits wage data
  • UK unemployment is expected to stay at 3.8%
  • Euro (EUR) fell after German wholesale prices fell
  • Eurozone GDP data is due

The Pound Euro (GBP/EUR) exchange rate is falling, paring gains from the previous session. The pair rose +0.40% yesterday, settling on Monday at €1.1518 and trading in a range between €1.1461 – €1.1526. At 05:35 UTC, GBP/EUR trades -0.07% at €1.1510.

The pound pushed higher on Monday, despite a lack of fresh fundamental drivers. The pound has found support from the BoE interest rate decision last week after the central bank hiked rates by 25 basis points.

The central bank has kept the door open for further rate hikes. However, BoE Governor Andrew Bailey also said that he expects inflation to fall sharply from April. In this case, the BoE may not need to hike rates further.

One of the key factors driving inflation has been the tight UK labour market, where high demand and low supply have pushed wages higher. Today UK labour market data is expected to show that unemployment held steady at 3.8% but that wages excluding bonuses rose 6.8%, up from 6.6%, a figure which could unnerve the BoE. Strong wages growth suggests that inflation could become embedded in the economy.

Hotter-than-expected wage growth could fuel bets that the BoE could hike interest rates again in the June meeting, pushing the pound higher. Meanwhile, weaker-than-forecast jobs data and signs that the labour market is cooling could weigh on the pound.

The euro fell yesterday after German wholesale price cooled by -0.5% year on year, after rising 2% in February. This was the first time that wholesale prices have cooled since 2021. Also dragging on the euro was eurozone industrial production data which fell by 4.1% month on month, a much steeper decline than analysts had expected.

Today the focus will remain on the eurozone economic calendar with the release of eurozone GDP data for the first quarter. Expectations are for Q1 GDP to grow 0.1%, confirming the initial reading and confirming that the eurozone avoided a recession.