- Pound (GBP) falls after 2-days of gains
- UK wage growth cools
- Euro (EUR) rises after German ZEW economic sentiment
- The outlook improved for a 2nd straight month
The Pound Euro (GBP/EUR) exchange rate is falling after two days of gains. The pair rose +0.13% in the previous session, settling on Monday, at €1.1568 and trading in a range between €1.1529 – €1.1576. At 10:35 UTC, GBP/EUR trades -0.24% at €1.1540.
The pound is falling after the latest UK labour market data showed that wage growth is easing, a sign that the UK labour market is cooling.
The set of labour market data for the UK did not include figures for employment or unemployment however, the data from the Office for National Statistics did show that average earnings, excluding bonuses, rose 7.8% compared to a year earlier. This was down from an upwardly revised 7.9% in July which was the fastest since the records began in 2001.
Notably wage growth, including bonuses, cooled to 8.1%, down from 8.5%, which could build confidence within the Bank of England that the 14 straight interest rate hikes since the end of 2021 are starting to have an effect on the labour market.
Bank of England held rates at 5.25% in their last policy decision. In September and could do so again in November. The prospect that the Bank of England kid be at the end of its hiking cycle has weighed on demand for the pound.
Meanwhile, data on Tuesday also showed that the number of employees on payrolls fell by 11,000 in September coming after an 8,000 drop in August. Separately, vacancies also fell to 988,000 in the three months to September extending along the Klein.
The euro is pushing higher, boosted by the latest German ZEW economic sentiment data, which unexpectedly improved significantly in October to -1.1, up from -11.4 in September and well ahead of the -9 expected.
This is the second straight month that economic sentiment has come in significantly ahead of forecasts which suggests that we’ve now passed the low point as the outlook starts to improve and on hopes that inflation rates will continue to decrease further. Safe are negative factors such as the Israel conflict have only had a limited impact on the overall more optimistic outlook.
