- Pound (GBP) is falling after a flat day yesterday
- Unemployment unexpectedly rose to 5.2% in Q4
- Euro (EUR) is rising despite mixed data
- German ZEW economic sentiment fell, but current expectations improved
The Pound-Euro (GBP/EUR) exchange rate is unchanged on Monday after losses last week. The pair was unchanged in the previous week, settling on Monday at €1.1502. It traded between €1.1490 and €1.1513. At 17:30 UTC on Tuesday, GBP/EUR trades -0.50% lower at €1.1442.
The pound has fallen sharply after weak jobs data paved the way for more rate cuts from the Bank of England.
UK unemployment rose to 5.2% in the final quarter of last year, up from 5.1% and above economists’ forecasts of 5.1%. This marked the highest level since the pandemic.
At the same time, regular private sector wage growth, the BoE’s preferred pay indicator, fell to 3.4%, its lowest level in over five years.
A separate tax indicator showed that the number of employees on payroll fell by 11,000 in January, bringing the year-to-date decline to 134,000.
The data are likely to reassure Bank of England policymakers that inflationary pressures in the labour market are cooling quickly enough to warrant another interest rate cut.
The market is now fully pricing in two rate cuts this year, following soft data on the worrying signs in the jobs market.
UK CPI figures are due tomorrow and are expected to show the inflation cooled to 3% year on year, down from 3.4%.
The EUR is rising, benefiting from the weaker pound and despite mixed economic sentiment in Germany.
The closely watched ZEW economic sentiment index showed that sentiment unexpectedly cooled in February to 58.3, down from 59.6 and defying expectations of an improvement to 65.
However, the assessment of the current economic situation continued to improve, with the indicator for Germany rising to -65.9. This suggests that Germany’s economy could be entering a fragile phase of recovery.
Looking ahead, the economic calendar is relatively quiet until Friday’s business activity data.