- Pound (GBP) is falling after 4 days of gains
- Unemployment hits the highest level since the pandemic
- Euro (EUR) rises despite deteriorating German economic sentiment
- Eurozone composite PMI rose to a 17-month high
The Pound-Euro (GBP/EUR ) exchange rate is falling after four days of gains. The pair rose 0.18% in the previous session, settling on Monday at €1.1399. It traded between €1.1358 and €1.1406. At 14:00 UTC, GBP/EUR trades -0.35% at €1.1359.
The pound is falling sharply after weaker-than-expected UK labour market data, which raised expectations that the Bank of England will cut interest rates at its December meeting.
UK unemployment rose by more than expected to 5% in the three months to September, up from 4.8% previously, marking the highest level since the pandemic. Economists had expected an increase to 4.9%.
Meanwhile, the redundancy rate jumped to 4.5 per thousand employees in the three months to September, marking the highest level since January 2024.
Separate tax data showed that the number of employees on payroll fell by 32,000 in October, following a downwardly revised 32,000 in September, meaning the economy has lost almost 180,000 jobs since the Reeves 2024 budget.
Wage growth was lower than expected at 4.6% adding to the picture of a weakening jobs market.
Following the data, the market is pricing in an 80% probability of a December rate cut, up from 68% on Monday.
The EUR is rising despite deteriorating German economic sentiment. The German ZEW economic sentiment index unexpectedly fell in November to 38.5, down from 39.3 in October, falling short of expectations of 40. The number indicates a decline in confidence among financial analysts in the economic outlook of the eurozone’s largest economy.
The deteriorating sentiment is characterized by a lack of confidence in Germany’s economic policy to tackle pressing issues and structural problems.
For the broader eurozone economy, expectations improved slightly, rising from 2.3 points to 25 in November.
Looking ahead, attention will turn to German inflation figures, which are due tomorrow. These are the secondary readings, and are not as market-moving as preliminary numbers. Expectations are for inflation confirm that inflation rose to 2.3% in October.