The Pound has made a moderate advance against the Euro recently, but remains in a weakened state over ongoing Brexit concerns.
Pound may Slide if UK Wages Fail to Keep Pace with Inflation
In the coming weeks, the Pound could slide against the Euro depending on the relationship between UK wages and inflation.
Previous figures showed inflation at 2.6% in July, but wage growth at a lower 2.1% in June.
Wages below the pace of inflation are considered one reason preventing the Bank of England (BoE) from raising interest rates, so any improvement in this area could boost the Pound.
The next UK inflation rate announcement is due on September 12th, while earnings data is out a day later on September 13th. In the best-case scenario, inflation could drop slightly while wage growth rises, although the latest forecasts are unfortunately for falling inflation and slower wage growth also.
Euro Turbulence Possible on Upcoming Draghi Comments
The Euro is tipped to turn volatile in the near-term, depending on what European Central Bank (ECB) President Mario Draghi has to say.
Draghi will be speaking at the Jackson Hole Symposium, a three-day event that brings together central bankers from around the world.
For Draghi, this will be the first scheduled speech at the event in three years, which only amplifies the possible impacts of his comments.
That said, the hype may prove misplaced as some economists believe that Draghi will not make any ground-breaking remarks. Among these have been Commerzbank analyst, who have predicted that;
‘It might be appropriate for Draghi to use his Jackson Hole appearance to announce a slow and cautious exit from ultra-expansionary monetary policy, referring to the improved economy. At least some Euro traders had expected this to happen and were disappointed after reports from ECB sources had dashed such expectations, calling them “wrong”’.
On a similarly cautious note, Private Client Group Chief Investment Officer Bill Northey has projected that;
‘I think people will most look forward to, but also be most disappointed by, the Draghi speech. At most he will make some additions to what is already known, but it will be devoid of any real new policy information’.
In the event that Draghi does commit to reversing quantitative easing and tightening monetary policy, the Euro could rise sharply against the Pound.
Recent Interbank GBP EUR Exchange Rates
At the time of writing, the Pound to Euro (GBP EUR) exchange rate was trading at 1.0876 and the Euro to Pound (EUR GBP) exchange rate was trading at 0.9193.
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