- Pound (GBP) is falling after gains yesterday
- UK unemployment rose to 4.8% and wage growth remains sticky.
- Euro (EUR) rises as the political situation in France improves
- Lecornu pledges to suspend Macron’s pension reform
The Pound-Euro (GBP/EUR) exchange rate is falling, giving back yesterday’s gains. The pair rose 0.25% in the previous session, settling on Monday at €1.1527. It traded between €1.1467 and €1.1532. At 21:00 UTC, GBP/EUR trades -0.45% at €1.1474.
The pound fell on Tuesday against both the EUR and the US dollar as data showed that UK wage growth was the slowest since 2022 and the unemployment rate unexpectedly nudged higher.
Employment rose to 4.8% in the three months to August, up from 4.7% previously. Meanwhile, average weekly earnings excluding bonuses rose 4.7% marking the slowest pace since May 2022, but still slightly down from 4.8% the previous reading.
Private sector earnings excluding bonuses rose 4.4% the weakest since the end of 2021, down from 4.7%.
The data points to a slow deterioration of the UK jobs market, which could give the doves at the Bank of England reason to consider cutting interest rates again.
The Bank of England left interest rates unchanged at 4% as it continues to monitor inflationary pressures in the economy.
Following the data, the markets raised rate cut expectations and are pricing in a 25 basis point cut in March next year, rather than April, with another rate cut fully priced in by the end of 2026.
The EUR gained ground on Tuesday as French political uncertainty calmed.
French Prime Minister Sebastian Lecornu pledged to suspend President Macron’s landmark pension reform until after the 2027 election to assure his government’s survival.
This latest concession and bowing to pressure from the left means that the main far-left party has managed to stay with its escalation in the month-long political crisis in France.
Thanks to this concession, the left said they will not vote to topple Lecornu in a no-confidence vote. However, this also means that one of micron’s main economic legacies may be killed off at a time when France’s public finances are in a dire state and the budget deficit is massive.
On the data front, German ZEW economic sentiment rose by less than expected at 39.3, up from 37.3 in September, but below the 40.5 forecast. Attention now turns to here, which is an industrial production date tomorrow