- Pound (GBP) is falling but gains across the week
- BoE’s Bailey appears to be softening his tone on rate cuts
- Euro (EUR) is rising despite economic sentiment falling
- French and Spanish inflation edged higher
The Pound-Euro (GBP/EUR) exchange rate is falling on Friday, giving back yesterday’s gains. The pair rose 0.17% in the previous session, settling on Thursday at €1.1738. It traded between €1.1708 and €1.1744. At 14:30, GBP/EUR trades -0.3% at €1.1697. The pair fell -0.2%.
The pound fell on Friday as the market continued to digest comments from Bank of England Governor Andrew Bailey, who noted growing signs of a slowdown in the UK jobs market.
Industry data this week, as well as the ONS figures earlier this month, suggest growing signs that the UK jobs market is slowing as employers respond to higher National Insurance contributions by cutting hiring and lowering pay rises.
Andrew Bailey said that the impact of the policy on the labour market would be considered when the policymakers meet again in August. Speaking at the British Chamber of Commerce trade conference on Thursday, Bailey said he was hearing more evidence that companies are adjusting employment levels after the tax increase.
The UK economy saw a drop of 100,000 in PAYE payroll numbers in May, marking the largest monthly fall since 2020.
The market is noting A softer stance from Bailey, which is lifting rate cut expectations.
The euro is rising despite eurozone economic sentiment falling in June. The latest data from the European Commission showed a further erosion in business sentiment, with the economic sentiment indicator dropping to 94 in the eurozone.
France posted the steepest decline in sentiment, followed by Spain and Germany.
The decline was led by deteriorating industry confidence, with retail also contributing.
Elsewhere data also showed that inflation inched up in both France and Spain although not enough to concern the ECB officials who are confident that the 2% target will be met this year.
French inflation rose 0.8% annually in June, up from a four-year low of 0.6% in May, whilst in Spain, inflation rose 2.2% in line with estimates.
Eurozone inflation is expected to be released next week, with ECB President Christine Lagarde also due to speak.