GBP/EUR: Pound Heads Higher As EU To Mull Over Brexit Extension
  • Pound (GBP) rose after strong wage growth
  • UK CPI is forecast to cool to 9.8%
  • Euro (EUR) fell after German ZEW economic sentiment falls
  • EZ final inflation data is due

The Pound Euro (GBP/EUR) exchange rate is holding steady on Wednesday for a second straight day. The pair settled on Wednesday at €1.1322, after trading in a range between €1.1317 – €1.1354. At 05:45 UTC, GBP/EUR trades +0.01% at €1.1324.

The pound pushed higher yesterday after UK jobs data, which showed that unemployment ticked higher while wage growth was faster than expected. UK unemployment rose to 3.8% in the three months to February, up from 3.7%. This was the highest level since the second quarter of last year.

Meanwhile, annual pay growth for the three months to January was revised higher to 5.9% well, ahead of expectations of a decline to 5.1%. Wage growth excluding bonuses held steady at 6.6%, defying expectations of a decline to 6.2% and keeping inflationary pressures high.

Today inflation data will be in focus, and expectations are for the consumer price index to ease out of double digits to 9.8% year on year in March, down from 10.4%. Meanwhile, Core inflation which strips out more volatile items such as food and fuel, is expected to cool slightly to 6% from 6.2%.

Hot inflation and solid wage growth will keep pressure on the Bank of England to raise interest rates again when they meet next month.

The euro came under pressure after data showed that economic sentiment in Germany weekend in April. The closely watched ZEW economic sentiment index for the eurozone’s largest economy unexpectedly fell to 4.1 in April, down from 13 in March and well below the 15.3 forecast.

Today eurozone inflation will also be in focus; this is the final reading and is expected to confirm the preliminary reading of 6.9% year on year down from 8.5% in February. Meanwhile, core inflation is expected to confirm a tick higher to 5.7%, up from 5.6%.

The data could support hawkish comments from ECB officials in recent weeks as the central bank continues to fight high inflation.