- Pound (GBP) rises for a second day
- UK pay grew by 6%, ahead of the 5.9% forecast
- Euro (EUR) falls despite upbeat data
- German ZEW economic sentiment improved sharply
The Pound Euro (GBP/EUR) exchange is rising for a second straight day on Tuesday. The pair rose 0.39% in the previous session, settling on Monday at €1.2038 and traded in a range between €1.1989 and €1.2054. At 17:15 UTC, GBP/EUR is trading 0.18% higher at €1.2065.
The pound is rising after data from the Office of National Statistics showed that UK worker’s pay growth grew sharply in the final quarter of last year whilst unemployment remained unchanged, defying expectations of an increase.
The data showed that average weekly earnings rose 6% in the three months to the end of December, up from 5.6% and above the 5.9% forecast. Meanwhile, regular pay, excluding bonuses, rose from 5.6% to 5.9%, in line with estimates, highlighting the challenges that the Bank of England faces as it weighs up cutting interest rates.
The unemployment rate remained unchanged at 4.4%, despite expectations of a rise to 4.5%. The number of job vacancies rose to 819,000 in January, up from 818,000 in December.
The data suggests that the UK’s labour market is healthier than feared. Business surveys had suggested that employers were reacting to the chancellor’s October budget by cutting jobs quickly.
The euro is falling despite encouraging data from Germany, which shows the economic sentiment is improving.
Germany’s economic sentiment surged in February, with a ZEW indicator increasing by 15.7 points to 26, marking the highest level since July last year. The increase in optimism has been fueled by ECB rate cuts and optimism surrounding fiscal stimulus.
In the January meeting, the ECB cut rates by 25 basis points to 2.75% and reiterated that inflation is on track to ease to the 2% target and could reach the desired level by summer this year.
Looking ahead, the eurozone economic calendar is quiet tomorrow. Attention turns to German wholesale inflation on Thursday.