- Pound (GBP) rises with inflation data in focus
- UK unemployment fell to 3.8%
- Euro (EUR) slips after economic sentiment deteriorates
- ECB meeting is tomorrow
The Pound Euro (GBP/EUR) exchange rate is rising on Wednesday, adding to gains in the previous session. The pair settled 0.3% higher on Tuesday at €1.2001 after trading in a range between €1.1957 – €1.202. At 05:45 UTC, GBP/EUR trades +0.03% at €1.2005
The Pound rose yesterday following encouraging UK jobs data. The unemployment rate ticked lower to 3.8% in the three months to February, a pre-pandemic level, down from 3.9% in January. The claimant count, which is timelier, fell again by 46k in March after dropping 58k in February.
Meanwhile, wages, including bonuses, rose 5.4%, up from 4.8% in January. However, the rise in wages failed to keep up with inflation, which jumped to 6.2% in February. This means that the squeeze on household incomes continues to pile pressure on the BoE to raise interest rates again, possibly as soon as in the May meeting.
Looking ahead, UK inflation data is due to be released today. Analysts expect inflation to rise to 6.7% year on year in March, a new 30 year high. Hot inflation could fuel bets of a more hawkish BoE.
The euro gained in the previous session after inflation data boosted expectations of a more hawkish European Central Bank. Consumer price inflation rose to a record 7.3% year on year in March, up from 5.3% in February.
Meanwhile, wholesale inflation jumped to 22.6% annually, up from 16.9% in February. High wholesale inflation suggests that consumer price inflation is likely to continue rising.
Separately German ZEW economic sentiment data fell further in April to -41, down from -39.1 in March but better than the -49 that analysts forecast. Economic sentiment fell in the eurozone’s largest economy as both the uncertainty surrounding the war and rising inflation took their toll.
Today there is no high impacting euro zone data. Instead, investors will look ahead to the European Central Bank interest rate announcement on Thursday.
