- Pound (GBP) is falling but rises modestly across the week
- UK unemployment and inflation rose, highlighting BoE challenges
- Euro (EUR) is rising despite weak German data
- ECB is expected to leave rates unchanged next week
The Pound-Euro (GBP/EUR) exchange rate is falling after gains yesterday. The pair rose 0.24% in the previous session, settling on Thursday at €1.1563. It traded between €1.1519 and €1.1582. At 09:30, GBP/EUR trades -0.05% at €1.1558. The pair is expected to rise 0.08% across the week, following two consecutive weeks of losses.
The pound is lower today but unchanged across the week as investors continue to digest a mixed bag of data. The UK jobs market showed signs of slowing, with unemployment unexpectedly ticking higher to 4.7% in the three months to May. Payrolls also fell by 41,000, worse than expected, although the previous month’s payroll losses were upwardly revised to -25,500, from 109,000, easing worries slightly. Nevertheless, payrolls have fallen by 185,000 since the October Budget.
Earlier this week, UK inflation data rose by more than expected to 3.6% YoY, up from 3.4%.
The mixed data highlights the BoE’s challenges as it looks to continue cutting rates. The market assigns an 80% probability to a 25-basis-point rate cut in August.
The euro is rising after data showed that German wholesale inflation fell by the most in 9 months in June. PPI fell by 1.3% year on year in June, following a 1.2% decline in May. This marked the fourth straight month of falling prices and the largest decline since September 2014, mainly due to a 6.4% decline in May.
The data comes ahead of next week’s European Central Bank interest rate decision, where the central bank is widely expected to leave rates unchanged at 2%. The central bank is expected to adopt a wait-and-see stance ahead of the August 1st deadline for trade tariffs. President Trump has stated that a 30% tariff will be imposed if no agreement is reached prior to August 1.
The ECB is still expected to cut rates once more this year.