On Tuesday, the Pound to Euro (GBP/EUR) exchange rate remained trading above the 1.27 level despite the release of disappointing UK GDP and current account deficit data.
On Monday, the Pound to Euro (GBP/EUR) exchange rate softened slightly despite the release of weaker than forecast data out of Germany. With no UK data due for release the currency pair is likely to remain range-bound due to light trade ahead of Christmas.
Official data showed that German import prices dropped 0.8% in November, compared to expectations for a 0.5% loss, after a 0.3% down-tick in October.
The Pound Sterling to Euro (GBP/EUR) exchange rate is forecast to experience a quiet week amid the global financial wind down for the Christmas break; the single currency, however, is likely to remain under pressure due to concerns over Greek Presidential elections.
The Pound spent most of last week higher against the single currency as economic data out of the UK suggested that an expected economic slowdown may not be as bad as first expected as industrial activity, employment and retail sales all improved.
UK Average Earnings Increase, Pound Sterling (GBP) Gains
The biggest supporter for Sterling was Wednesday’s Average earnings and Thursday’s retail sales data. The Euro meanwhile was weighed upon by more poor inflation data and growing concerns that Greece is heading towards a snap election that could result in the anti-Euro Syriza party taking power. If such an event was to occur, the uncertainty of the Euro crisis is likely to return to the currency bloc.
Unemployment in the UK remained at a six-year low of 6% in the third quarter of the year and was down from the previous quarter’s figure of 6.2%. The report compiled by the London based Office for National Statistics (ONS) showed that 1.96 million people were unemployed in the quarter 63,000 fewer than in the second quarter.
The ONS figures also showed that there were 30.80 million people in work in the three-month period, 115,000 more than for the May-to-July period, driven by more people in full-time work.
Wage growth in the country also increased more than the rate of inflation for the first time in six years. Average earnings excluding bonuses were up by 1.6% from the previous year and wages including bonuses were up by 1.4%. The nation’s inflation rate meanwhile slowed to 1% in November as oil prices and price wars between supermarkets pushed prices lower.
Business Secretary Vince Cable said of the result; ‘Today we’ve had another remarkable set of labour market figures, which show that the strong performance of the labour market has been broad-based. This has led to an almost record share of the UK working age population being in work. In addition we are now seeing rises in average pay growth above inflation, meaning annual real wage rises for many workers. However there is still more to be done. Although youth unemployment has fallen in the past year, it remains too high. That is why we will continue to encourage firms to invest in the UK and equip British workers with the skills they need to compete in the jobs market.’
Pound Sterling (GBP) Exchange Rate Boosted by UK Retail Sales Data
Retail sales meanwhile surged to ten-year high thanks to the Black Friday sales.
According to industry expert Natalie Berg; ‘These numbers verify the shift in spending patterns happening in the final quarter of the year. Black Friday led to unprecedented demand. What we don’t know is to what extent did this simply bring spending forward. I suspect it slowed in the first couple of weeks in December.’
The Euro in contrast was weakened by data showing that inflation in the Eurozone fell yet again to a reading of just 0.3%. On a month on month basis, inflation slipped into deflation territory by sliding by -0.2%. Pressure is building on the European Central Bank to introduce a quantitative easing programme in the New Year despite the Germans being opposed to such measures.
The only major data release due next week for the Euro will be Monday’s Eurozone consumer confidence data. The Pound meanwhile, will likely move on Tuesday as the final GDP reading for the third quarter is released. After that, the currency pair will see little if any movement as the markets close for the Christmas break.
