- Pound (GBP) rise after jobs data
- UK unemployment rises to a 2021 high
- Euro (EUR) extends losses after France’s snap election
- ECB’s Lane to speak
The Pound Euro (GBP/EUR) exchange rate is rising for a third straight day. The pair rose 0.24% in the previous week, settling on Tuesday at €1.1782 and trading in a range between €1.1708 and €1.1782. At 13:00 UTC, GBP/EUR trades 0.45% at €1.1826.
The pound is rising against a weaker euro but falling against the US dollar as UK unemployment rises to its highest level since 2021, a sign that the UK labour market is starting to loosen.
Unemployment unexpectedly rose to 4.4%, up from 4.3%. However, basic pay growth was a little lower than expected at 6%. The measure of wage growth included bonuses was hotter than expected at 5.9% rather than 5.7%. Meanwhile, the private sector wage growth, which is closely watched by the Bank of England, cooled to 5.8%, the lowest since mid-2022
With unemployment rising and separate data showing that vacancies are falling, the reports seem to point to a cooling in the labor market in general. Meanwhile, the fact that wages excluding bonuses failed to tick higher will be a relief to the Bank of England, which may have been concerned about the large increase in the minimum wage in April.
The data appears to support the view that the Bank of England could cut rates sooner. The market now pricing in almost 10 basis points of rate cuts in August, up from 7 basis points yesterday. The market also sees 35 basis points worth of cuts by the end of the year, up from 31.
Meanwhile the euro has fallen further as investors continued to digest the surprise developments in the political sphere in the region.
The snap election in France creates political instability, which the markets dislike. Given the lack of fresh economic data today, markets are remaining with that narrative.
Lookig ahead ECB chief economist Philip Lane is due to speak later. His comments will be watched closely for clues over the future path for interest rates after the ECB cut interest rates last week.
