- Pound (GBP) is rising for a third day
- UK unemployment unexpectedly fell to 4%
- Euro (EUR) is edging lower as German wholesale prices fall further
- German ZEW economic sentiment improves
The Pound Euro (GBP/EUR) exchange rate is rising for a third straight day. The pair rose 0.22% in the previous session, settling on Monday at €1.1970 and trading in a range between €1.1940 and €1.1981. At 11:00 UTC, GBP/EUR trades +0.14% at €1.1989.
The pound is heading higher against the euro and the USD as investors digest the latest jobs report for the UK.
UK unemployment unexpectedly fell to 4% in the three months to September, down from 4.1%. Meanwhile, wage growth excluding bonuses eased o 4.9%, down from 5.1%, in line with expectations.
The Bank of England will welcome signs of cooling wage growth as it continues to assess whether to cut interest rates in the coming meetings.
High wage growth is intrinsically linked to high service sector inflation, which has been a hurdle to the Bank of England cutting interest rates faster.
UK inflation data is due tomorrow. Headline inflation is expected to ease back below the Bank of England’s 2% target.
The market is pricing in a 90% probability that the Bank of England will cut interest rates by 25 basis points in November after reducing rates in August.
The euro is heading lower after German wholesale prices fell again in September and despite German economic morale improving.
German wholesale prices fell to 0.3% month over month, defying expectations of a rise of 0.2% and pointing to a weak demand environment.
Meanwhile, German ZEW economic sentiment improved more than expected, rising to 13.1 from 3.6 in September and ahead of forecasts of 10. While sentiment has risen, it has done so from a very low base. Still sentiment is improving on expectations of stable inflation and lower interest rates.
Data comes ahead of the ECB’s interest rate decision on Thursday. The central bank is expected to cut interest rates by 25 basis points to 3.25%, marking its third rate cut since June.