- Pound (GBP) is rising for a second day
- UK unemployment remained at a 4-year high of 4.7%
- Euro (EUR) is falling as economic sentiment falls
- German ZEW economic sentiment dropped to 34.7
The Pound-Euro (GBP/EUR) exchange rate is rising for a second day. The pair rose 0.2% in the previous session, settling on Monday at €1.1564. It traded between €1.1525 and €1.1574. At 10:00, GBP/EUR trades +0.28% at €1.1596.
The pound is rising as UK jobs data highlighted the tricky balancing act that policymakers at the Bank of England are facing. Payrolls fell by only 8000 in July, which is the smallest drop since January, and is below the 20,000 full-time jobs that parliament had expected.
Meanwhile, the unemployment rate remained unchanged at 4.7% in line with expectations and a four-year high; however, headline wage growth remained elevated at 5% suggesting a difficult decision for the Bank of England policymakers next month.
The central bank has been watching the jobs market closely amid signs that conditions are deteriorating, with the number of job vacancies falling continuously for three years. Figures yesterday from the Chartered Institute of Personnel and Development showed that British businesses are displaying the weakest hiring intentions since the pandemic.
Still with inflation sticky at 3.6% in June, the Bank of England could struggle to cut interest rates further.
The euro is falling as economic sentiment in the eurozone’s largest economy fell by more than expected. Germany’s ZEW economic sentiment index dropped to 34.7 in August, down from 52.7 in July. Expectations had been for a decline to 40.
Meanwhile, economic sentiment for the euro area dipped by 11 points on a monthly basis to 25.1 in August whilst the current situation index fell by 7 points to -31.2.
This latest survey comes as some experts expressed disappointment in the EU-US trade deal that was announced last month, saying that the outlook, in particular, for the chemical and pharmaceutical industries had deteriorated. Mechanical engineering and metal sectors, as well as the automotive industry, are all affected.
