• Pound (GBP) is supported by wage growth expectations
  • UK jobs market remains tight
  • Euro (EUR) fell after wholesale price data fell
  • German ZEW economic sentiment data is due

The Pound Euro (GBP/EUR) exchange rate is rising for a fourth straight day. The pair rose +0.22% yesterday, settling on Monday at €1.1625 and trading in a range between €1.1581 – €1.1638. At 06:35 UTC, GBP/EUR trades +0.09% at €1.1642.

The pound rose in the previous session after a survey by the Chartered Institute of Personnel Development (CIPD) highlighted expectations of higher wages. The survey reported that British employers expect to increase pay by 5% over the coming year. Further, businesses are increasingly making counter offers to keep staff who are tempted by higher wages from rival firms.

Jobs data will remain in focus with the release of UK labour market data which is expected to show that the jobs market remains tight. The economy is expected to have created 50,000 jobs in June, down from 125,000 previously but still a solid number. Unemployment is expected to remain at 4% in the three months to June, in line with May.

However, average earnings are expected to rise to 7.4% in the three months to June, up from 7.3%, a figure which could keep inflation elevated and pressure on the Bank of England to continue hiking interest rates.

The BoE has raised interest rates to 5.25%, and inflation has fallen more slowly than expected to 7.9% annually in June. Inflation data is due to be released later in the week.

The euro fell in the previous session after German wholesale prices fell by more than expected in July. Wholesale prices fell -2.8% year on year after falling -2.9% in June. Analysts had expected wholesale prices to fall -2.6%. The data raises concerns over the demand picture in the eurozone’s largest economy.

Attention now turns to the German ZEW economic sentiment index, which is expected to hold steady at 14.7 in August. Weaker economic sentiment could raise concerns over a longer recession in Germany and pull the euro lower.