UK (Commonwealth) Following the most recent interest rate decision by the European Central Bank (ECB), the pound euro (GBP/EUR) exchange rate stayed largely stable.
This afternoon, concerns about ongoing inflation helped to keep the euro (EUR) higher, as officials made hints that tighter monetary policy might be required for longer than expected.
Following this morning’s dismal jobs news, GBP investors continued to be cautious to make offers, which put further pressure on the value of the pound (GBP).
As of this writing, the beginning levels of today’s trade for GBP/EUR are roughly constant at $1. 1893.The release of the UK‘s most recent labor data this morning has kept the pound euro (GBP/EUR) exchange rate stuck in a limited range.
As of writing, the GBP/EUR exchange rate is trading at approximately €1.1878, essentially staying steady from its opening levels this morning.
Pound (GBP) undercut by labor data from the UK.
Following the release of the UK’s most recent labor data this morning, investors are finding it difficult to pay attention to the pound (GBP).
According to the Office for National Statistics (ONS), average wages (excluding bonuses) decreased from 6% to 5.7% in June, the lowest level in nearly two years, while unemployment remained at 4.4%.
Bank of England (BoE) interest rate drop bets have been reinvigorated by the decline in regular wage growth. In light of the facts, the likelihood of a rate cut in August increased from 35% to 40%.
Following the release of the UK’s most recent inflation data on Wednesday, the likelihood of an August rate drop had previously decreased.
Rate-setters will be relieved following today’s labor market data, which keeps open the option to reduce in August amid strong CPI service inflation, said Rob Wood, Chief UK Economist at Pantheon Macroeconomics. A softer private sector pay growth in May will encourage rate setters and signal only minor upside risks to their Q2 pay growth outlook.
We believe that a rate cut in August is extremely unlikely. Just like they did in June, the MPC may easily write off yesterday’s stronger-than-expected CPI services figure as erratic, observe a slowdown in wage growth, and proceed with a rate decrease in August.
Euro (EUR) unchanged prior to ECB rate announcement While investors await the most recent interest rate announcement from the European Central Bank, the euro (EUR) is trading sideways compared to most of its peers this morning.
The markets will be primarily focused on the European Central Bank’s forward guidance this afternoon, as it is widely predicted that the bank will maintain interest rates at 4.25%.
If ECB officials are unable to reach a unanimous decision, EUR movement might be restricted; yet, if the ECB makes any indications about potential future cuts, the single currency might collapse.
“Lagarde will leave more doors open by continuing to emphasize the data-dependent nature of the ECB, making it too early to give any firmer signals about future meetings,” said Jan von Gerich, an economist at Nordea.
Beyond the European Central Bank’s impending interest rate decision, the release of the UK’s most recent retail sales figures tomorrow may cause some volatility in the pound-euro exchange market.
June’s month-over-month result is expected to come in at -0.4%, which would be much lower than the 2.9% spike in May and might hurt the Pound if it encourages further bets on a rate drop by the BoE.
Regarding the euro, there won’t be much economic data available on Friday; thus, by the conclusion of the week, exchange rates for the EUR will be erratic.
In its last monetary review, the Bank of England (BoE) opted to keep interest rates at 5%. The Monetary Policy Committee (MPC) board of the Bank voted to reduce rates to 4.75% by 8-1, with only one member voting against it.
Andrew Bailey, governor of the Bank of England, defended the rate’s hold, saying that “we need to be careful not to cut [rates] too fast or by too much” since it is “vital that inflation stays low”.
The decision was made a day after the UK’s most recent inflation statistics, which showed a 2.2% annual rate of growth in the year ending in August despite an increase in airfare.
The Confederation of British Industry responded to the Bank’s decision by saying that it is a delicate balancing act between “not being too tight so as to choke off activity” and the “upside risks to inflation”.
You can read more about the BoE’s judgement from today on our website. Additionally, our colleagues have created a helpful explainer that will help you understand when interest rates are expected to decline once more.