- Pound (GBP) rises after losses yesterday
- UK wage growth cools in line with inflation
- Euro (EUR) falls despite German fiscal reforms being approved
- Russia fails to agree to a full cease-fire over Ukraine
The Pound Euro (GBP/EUR) exchange is rising after yesterday’s losses. The pair fell 0.13% in the previous session, settling on Tuesday at €1.1876. It traded between €1.1862 and €1.1902. At 15:30 UTC, GBP/EUR is trading 0.28% at €1.1913.
The pound is heading higher as investors look ahead to the Bank of England interest rate decision Tomorrow at 12:00 GMT.
Prior to that, UK labor market data will be released at 7:00 GMT, and investors will be looking for clues about the health of the jobs market, particularly average earnings, which are intrinsically tied to service sector inflation.
According to a survey by human resource data firm Brightmine, pay increases awarded by British employers have fallen back in line with inflation for the first time since October 2023. The survey showed that UK employers were cautious ahead of April’s increase in payroll taxes and a minimum wage increase.
Medium pay awards in the three months to the end of February held at 3% for the third consecutive rolling quarter, the joint lowest pace of increase since December 2021. UK inflation rose by 3% in the 12 months to January.
This survey also showed that a quarter of firms planned a hiring freeze or team restructuring in response to the labour government budget, which increases the burden on employers for Social Security contributions.
The euro is under pressure, trading lower against the pound and the US dollar despite Germany agreeing to important fiscal reform. On Tuesday, Germany approved Chancellor Friedrich Merz’s debt restructuring plan, which aims to stimulate growth in defense spending.
The end to German fiscal conservatism is expected to add inflationary pressure to the economy over the coming years, which could force the ECB to adopt a more cautious stance towards its monetary policy easing cycle. The ECB has cut rates six times since June 2024.
Meanwhile, on the geopolitical front, Russian President Putin failed to agree to a full 30-day ceasefire between Russia and Ukraine but has agreed to an immediate ceasefire and all energy and infrastructure.