EUR/GBP Holds Gains after German Unemployment Hits Record Low

March 31, 2017 - Written by Tim Boyer

STORY LINK EUR/GBP Holds Gains after German Unemployment Hits Record Low

Although Eurozone inflation was found to have slowed further than anticipated in March this failed to particularly weaken the EUR GBP exchange rate.

While this weaker showing reduces the impetus on the European Central Bank to consider tightening monetary policy the mood towards the single currency remained generally positive.

[Previously updated 30/03/2017]

The Euro to Pound Sterling exchange rate is recording gains of 0.2% to trade around 0.8576 today, with the day’s positive data so far having little effect.

Record-Low German Unemployment Rate, But EUR Waits for Inflation Data

A larger-than-expected drop in German unemployment has pushed the joblessness rate down to a post-reunification low of 5.8%, against predictions of the figure holding at 5.9%.

The number of people claiming out of work benefits fell -30,000 in March; almost double the expected decline.

This has helped take the edge off disappointing German retail sales figures for February, which fell -2.1% year-on-year rather than slowing from 2.7% to 0.4%.

Monthly sales volumes outperformed forecasts, recovering from a contraction of -1% to 1.8% instead of to 0.7%.

EUR/GBP exchange rates remain in positive territory but have not made gains on the data as investors are awaiting the other headline figures set for release today from the Eurozone consumer price index.

Profit-Taking and Weak Data Drives GBP Lower

UK consumer confidence may have unexpectedly held steady in March, but this has failed to prevent the Pound from declining today.

The index, published by GfK, remained at -6 instead of worsening to -7, but traders have returned to profit-taking on Sterling after a brief rally on the data when it was released at midnight.

The accompanying Lloyds business barometer weakened from 40 to 35.

Meanwhile, Nationwide house price data for February disappointed to the downside, showing that prices fell on the month for the first time since the middle of 2015.

Month-on-month prices declined -0.3% against expectations of 0.3% growth, while the year-on-year slowdown from 4.5% to 3.5% was double the extent expected and also the slowest pace of growth since August 2015.

EUR/GBP Exchange Rate Forecast; Eurozone Inflation Data and UK GDP in Focus

The next influential data for the EUR/GBP pairing on the calendar is the finalised fourth-quarter UK GDP figures for 2016, which are expected to hold steady at 0.7% quarter-on-quarter and 2% year-on-year.

A reprint might not affect the Pound much, but a surprise move higher or lower is likely to create noticeable volatility for GBP.

Shortly after comes the Eurozone consumer price indices for March.

The first estimates for price growth are expected to show weakening inflationary pressures, with core growth slowing from 0.9% to 0.8% and headline inflation weakening from 2% to 1.8%.

Markets are wary of a downside surprise, however, after Germany’s inflation data yesterday revealed a much sharper slowdown in price growth than expected.

Volatility in the oil markets is largely to blame but, while investors aren’t massively perturbed, Euro appetite still soured on the sight of inflation figures moving in the wrong direction and could do again later today.

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TAGS: Euro Pound Forecasts