- Pound (GBP) rises as unemployment fell to 4.1%
- UK pay growth eased to 4%
- Euro (EUR) holds steady despite German inflation cooling
- ECB are expected to cut rates on Thursday
The Pound Euro (GBP/EUR) exchange rate is rising on Tuesday for a second straight day. The pair added 0.08% in the previous session, settling on Monday at €1.1862 and trading in a range between €1.1831 and €1.1862. At 18:00 UTC, GBP/EUR trades +0.12% at €1.1860.
The pound is rising on Tuesday as investors digested a mixed labor market report that suggested the UK jobs market may be cooling, albeit at a slow pace.
Unemployment in the UK ticked lower in line with expectations to 4.1%, down from 4.2%. Meanwhile, wage growth excluding bonuses eased by more than expected to 4%, down from 4.5%. Economists had expected this to be 4.1%
Cooling wage growth suggests that price pressures are easing, which supports the view that the Bank of England could move to cut interest rates again. However, the data doesn’t require immediate action from the Bank of England, supporting the view that policymakers will likely keep interest rates unchanged in September and cut again in November.
The market is fully pricing in a November rate cut and sees the central bank cut rates by 47 basis points by the end of the year.
Attention will now turn to UK GDP data, which is due tomorrow and is expected to show that the economy grew very modestly in July.
Meanwhile, the euro is falling after the data confirmed that inflation in the eurozone’s largest economy cooled below the ECB’s 2% target.
Inflation in Germany eased to 1.9% year on year aligning with the preliminary reading and adding to expectations that the European Central Bank will reduce interest rates again this week.
The data comes after other data from Germany in recent sessions had pointed to a deteriorating economic outlook.
The ECB will meet on Thursday and is expected to cut interest rates for a second time by 25 basis points, taking the main interest rate to 3.5%.
