The Pound Sterling to Euro (GBP/EUR) exchange rate sank on Wednesday when the UK Unemployment Rate failed to fall in line with economists’ forecasts and Average Weekly Earnings flopped; in addition, the Pound Sterling to US Dollar (GBP/USD) exchange rate hit a five-year low at $1.4676.
The UK Unemployment Rate remained at 5.7% in January instead of falling in line with 5.6% forecasts, while Claimant Count Change recorded -31K. However, the UK employment rate reached a record high with 30.94 million people in work at 73.3%.
Average Weekly Earnings Including Bonuses slipped from 2.1% to 1.8% in January on the year while Average Weekly Earnings Excluding Bonuses fell from 1.7% to 1.6%.
Chancellor of the Exchequer George Osborne commented: ‘Today’s ONS [Office of National Statistics] figures record yet another economic milestone, confirming a new record high employment rate alongside a claimant count that has not been lower since 1975. This good news is further proof that the government’s long-term economic plan is working and that British families are seeing the results with regular wages rising more than five times faster than prices.’
However, Osborne is expected to release the last budget statement before the May general election today and that could influence the Pound Sterling to Euro (GBP/EUR) exchange rate further.
UK Political Uncertainty Damages Pound Sterling to Euro (GBP/EUR) Exchange Rate, GBP/USD Sinks to Fresh Lows
The British currency has been softer this week as investor sentiment declines amid a backdrop of political uncertainty. With the prospect of a political shakeup on the way, the Pound Sterling is likely to wane under the pressure.
Osborne continued to vie for votes, saying: ‘But in an uncertain world economy all of this progress will be at risk of collapsing back into chaos unless we carry on working through the plan that is delivering stability and rising living standards.’
Meanwhile, the Euro has also been fluctuating as a result of political developments between Greece and Eurozone finance heads.
However, perhaps more prominent on Wednesday is the clash between the European Central Bank (ECB) and 10,000 anti-austerity protestors in Frankfurt. Protesters were hoping to dampen the inauguration of the European Central Bank’s new HQ and protests have resulted in car fires and wide-spread vandalism.
The ECB recently began a period of quantitative easing (QE) and concerns are heightening that richer economies such as France and Germany will benefit rather than nations that need assistance such as Greece.
Lawmaker Sahra Wagenknech commented: ‘Expansive monetary policy serves the financial markets and the wealthy first and foremost. The money doesn’t reach the real economy as investment.’
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast
The Pound Sterling to Euro (GBP/EUR) exchange rate is likely to remain weak on Wednesday as the British Currency softens broadly.
However any developments in UK politics are also likely to impact the Pound Sterling—at this stage most events are forecast to place further downward pressure on the British currency.
The Euro to Pound Sterling (EUR/GBP) exchange rate is trending in the region of 0.7240. The Pound Sterling to Euro (GBP/EUR) exchange rate is trading at 1.3817.
