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GBP/EUR Exchange Rates Weaken after UK Labour Market Data

November 16, 2016 - Written by James Fuller

The Pound Sterling to Euro exchange rate was unable to recover from Tuesday’s sell-off after labour market data worried markets.

Strong Number of New Jobless Claims Tips Pound Sterling Back into Decline



After yesterday’s sell-off on the back of a concerning report suggesting the government still had no plans for Brexit, GBP/EUR exchange rates had started the morning on the rise. This was quickly ended, however, turning into a gradual decline after the release of the latest labour market data.

Initially the figures looked positive, with the ILO unemployment report for the three months until September showing an 11-year low. However, more recent data for October showed a surprise 9,800 more people claimed out of work benefits than the previous month, up nearly fivefold on the forecast. After being estimated at 700 last month, the previous increase in those claiming jobseekers allowance was revised markedly higher to 5,600.

According to Hargreaves Lansdown Senior Economist Ben Brettell;

‘There could be storm clouds gathering on the horizon. The claimant count – which in a quirk of the data is a more recent figure than the unemployment rate – jumped by 9,800 in October, with September’s figure revised upwards from 700 to 5,600. All in all, it does seem likely that unemployment could tick up somewhat during the coming months, though dire predictions made in the immediate aftermath of the vote appear wide of the mark.’

EUR/GBP Exchange Rates Edge Higher; Lacklustre Euro Benefits from Pound Sterling Weakness



A quiet data day saw rudderless Eurozone trading, with EUR still in positive territory after yesterday’s advance on the back of hopes Eurozone banks would benefit from the current global bond rout.

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However, the Euro was kept soft by the continuing argument over Germany’s budget surplus. Berlin spent €18.5 billion less that it received in revenues during the first half of 2016 and has long been under pressure to invest more in boosting the economy. The European Central Bank (ECB) and International Monetary Fund (IMF) have been two strong advocates of greater fiscal spending from Germany.

The German government is keen to hold onto its surplus while it can; with the world’s second-oldest population, the current lucrative levels of employment will soon begin to decline, cutting tax revenues and squeezing public finances.
According to DIW think-tank head Marcel Fratzscher;

‘If you look at it without immigration, the German labour force is already declining. From 2019, the labour force will start shrinking. The good budget situation will probably last another three or four years, but that won’t still be there in five or 10 years’ time.’

GBP/EUR Exchange Rate Forecast; UK Sales Data Could Support Pound Sterling



UK retail sales growth is expected to pick up again after markedly disappointing forecasts in September. Month on month sales are expected to return to positive growth, while year-on-year growth is projected to rise from 4% to 5.4%.
Although the figures could provide additional tailwinds for the British Pound, the Euro may find support from multiple developments on the economic calendar as well. On top of construction output and finalised Eurozone CPI figures for October, the ECB’s Mersch and Praet will be making public appearances.

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