- Pound (GBP) is rising, recovering yesterday’s losses
- UK private sector pay remained unchanged at 3%
- Euro (EUR) is falling despite hopes of a US-EU trade deal
- The US-EU are reportedly set to agree on a deal of 15% tariffs
The Pound-Euro (GBP/EUR) exchange rate is rising, recovering yesterday’s losses. The pair fell -0.15% unchanged in the previous session, settling on Tuesday at €1.1519. It traded between €1.1500 and €1.1548. At 11:30, GBP/EUR trades 0.22% at €1.1538.
The pound is rising, boosted by optimism across global markets after the US and Japan agreed on a trade deal, which might be said to have lifted the mood across stocks and currencies. The Footsie 100 rose to a record high.
The pound is rising across the board despite the fragile state of the UK public finances and the deteriorating outlook for the labour market.
Data show that private sector pay settlements remain unchanged at 3% in the three months to June, which actually represents a pay cut and inflation in real terms for many workers. This is down considerably from the 4.8% that private sector settlements were running at this time last year.
Banking and policymakers have warned that they are closely monitoring the health of the UK jobs market.
The euro is trading lower against the pound, despite rumors that the US and the EU are close to signing a 15% tariff deal, similar to the agreement Donald Trump struck with Japan. Should the EU agree to the trade deal, it will avoid the president’s threat to raise tariffs to 30% from August 1st.
Both sides would reportedly waive tariffs on some products, including aircraft, spirits, and medical devices. News of the potential deal has lifted the euro from earlier lows.
EU exporters are currently paying a universal 10% tariff in addition to the preexisting duties, which average 4.8%. Therefore, the 15% new tariff wouldn’t be that different.
Tariffs on cars, currently at 27.5%, would fall to 15%, which is good news for the German economy.
Attention will now turn to the ECB interest rate decision tomorrow. The central bank is widely expected to leave rate unchanged at 2%.