Pound V euro: GBP exchange rate pushes higher as UK wage growth surges
THE POUND strengthened against the euro this morning as investors welcomed the release of the UK’s latest employment data.
GBP/EUR is currently at around €1.136, up ever so slightly from this morning’s starting levels of around €1.134.
Sterling sentiment was lifted this morning as a jump in UK wage growth helped to alleviate some of the financial pressure on households.
According to data published by the ONS, average earnings in the UK surged from 2.2 per cent to 2.3 per cent in October, in line with expectations and causing wage growth to strike its best levels in 2017.
This helped close the gap between wages and inflation (which jumped to 3.1% in November) alleviating fears that the fall in real pay may have accelerated in the last quarter.
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The number of employed is at 32.080 million, down from a record high of 32.136 in the 3 months to July
However, the accompanying unemployment figures clipped Sterling’s wings this morning as the jobless rate held at 4.3 per cent at the start of the fourth quarter, disappointing investors who had expected it to fall to 4.2 per cent.
Economist Howard Archer stated: “UK labour market showing signs of faltering after resilience during much of 2017.
“Employment down 56,000 in 3 months to October after drop of 14,000 in 3 months to September.
“Number of employed at 32.080 million, down from record high of 32.136 in 3 months to July.”
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Also denting the pound’s gains this morning was the revelation that the number of people in work fell for a second consecutive month in October, with the number of people becoming economically inactive also rising.
At the same time, the euro is fighting back against the pound following a rebound in Eurozone industrial production in October, with factory output rising by 0.2 per cent after previously sliding by 0.5 per cent at the end of the third quarter.
The uptick in output was largely attributed to a jump in production of non-durable consumer goods, suggesting that European consumption is on the rise.
Looking ahead, the GBP/EUR exchange rate could dip on Thursday following the Bank of England’s (BoE) latest rate decision.
With the BoE expected to leave monetary policy untouched this month, the focus for investors will be on the bank’s policy plans for the coming year, with Sterling likely to tumble if policymakers signal that rates will remain on hold in 2018.
Meanwhile, the euro may strengthen tomorrow morning with the publication of the Eurozone’s latest PMI figures, with economists expecting a strong reading to cap off what has been a stellar year for the bloc.
However, euro gains could be tempered in the afternoon by the European Central Bank’s (ECB) own rate decision, with the bank expected to remain dovish in its outlook for 2018.
