Pound Versus Euro Three Month High with BoE Meeting Ahead
  • Pound (GBP) could slip if the job market cools
  • Unemployment expected to rise to 4.3%
  • Euro (EUR) looks to German ZEW economic sentiment
  • EU Commission downwardly revised GDP forecasts

The Pound Euro (GBP/EUR) exchange rate is rising, after losses in the previous session. The pair fell -0.18% yesterday, settling on Monday at €1.1632 and trading in a range between €1.1633 – €1.1687. At 06:35 UTC, GBP/EUR trades +0.08% at €1.1640.

The pound was flat against the euro in the previous session amid a lack of fresh fundamental drivers for investors to sink their teeth into. However, that is set to change today as attention turns to the UK labour market data.

The data is expected to show that unemployment ticked higher to 4.3% in July, up from 4.2% in June; meanwhile, average earnings excluding bonuses in the three months to July are expected to ease slightly to 7.6%, down from 7.8%.

A weakening in the UK labour market would take pressure off the Bank of England to raise interest rates aggressively.

Investors are currently expecting the Bank of England to hike interest rates by a further 25 basis points in the meeting next week, taking the rate to 5.5%. However, there is a growing expectation that this could be the last hike.

BoE governor Andrew Bailey told the Treasury Select Committee last week that UK interest rates could be near their peak.

The euro saw a lacklustre performance in the previous session as investors digested news that the European Commission had downwardly revised the region’s growth forecast for this year and next.

The EU Commission now forecasts growth of 0.8% in 2023, down from 1.1%, and growth in 2024 is expected to be 1.3%, down from 1.6% expected previously.

The downward revision comes after a series of weaker-than-expected data and after Q2 GDP was downwardly revised to 0.1%.

Attention now turns to German ZEW economic sentiment data, which is expected to deteriorate further in September. The economic sentiment index is set to fall to -15 from -12.3, and current conditions are expected to decline to -75 from -71. Weak data could highlight the region’s deteriorating outlook, particularly in the eurozone’s largest economy.