- Pound (GBP) is rising after losses yesterday
- UK wage growth expectations fall to a 4-year low
- Euro (EUR) is falling as energy prices rise
- Oil rises to $80 per barrel
The Pound-Euro (GBP/EUR) exchange rate is rising on Thursday after a flat finish on Wednesday. The pair rose 0.% in the previous session, settling on Wednesday at €1.1499. It traded between €1.1438 and €1.1509. At 17:30 UTC on Thursday, GBP/EUR trades 0.10% higher at €1.1510.
The pound is rising against the euro but resuming its selloff against the dollar as the war in the Middle East escalates and despite weak wage growth expectations.
According to the latest Bank of England survey, UK wage growth expectations are at the joint lowest in four years. Expected wage growth remained at 3.6% in February, the joint lowest since the reading started in 2022. Companies’ expectations of how much they would raise their own prices over the next 12 months fell 0.1 percentage point to 3.4%. Companies also said they expected to expand staffing levels by 0.1% over the coming year.
The central bank closely monitors wage growth to gauge whether to cut rates again this month, after cutting them to 3.75% in December. Investors have reined in BoE rate cut expectations since the start of the Middle East war amid rising oi prices.
The EUR is falling as energy prices continue rising. Oil has risen 5% today, pushing WTI to $80 a barrel. Rising energy prices have a greater impact on regions such as Europe and Asia, given their reliance on imported energy. If price increases are persistent, they will likely create stagflationary pressures of slower growth and higher inflation, which will hurt demand for European stocks and the Euro.
Separately, the minutes to the latest ECB meeting were released and were slightly more dovish than expected. The minutes showed that most ECB policymakers don’t expect rates to move this year but several ECB policymakers saw downside risks to inflation. The minutes were from a meeting that was before the Middle East crisis.
