Current Pound Sterling Euro GBP EUR Forecast Deteriorates

Modified: Thursday, 18 February 2016 13:02 BST - Written by David Woodsmith

STORY LINK Current Pound Sterling Euro GBP EUR Forecast Deteriorates

If the old market adage that ‘what should go up and doesn’t go up can only go down’ holds true, then the future prospects for the Pound Sterling (currency : GBP) are bleak. The early part of today’s session revealed that the level of UK joblessness remained at a ten year low of 5.1% last month. The Office of National Statistics numbers also showed that more than 31.4 million people were in employment in the UK – the highest number since records began in the early 1970s.

Another apparent positive contained in the data was the revelation that UK weekly earnings (excluding bonuses) had increased by a healthy annualised 2.0% in the final quarter of 2015. This was well ahead of the level of 1.8% anticipated by analysts, suggesting that UK workers are beginning to feel the benefit of the pick-up in the domestic labour market, which would be good news for inflation prospects.

However, the Pound put in another tepid performance against the other major currencies on the day in spite of these encouraging jobs number. The Sterling Australian Dollar exchange rate dropped by well over 2c on the day, while the Canadian Dollar recorded gains of almost 3c against the UK unit. So, what went wrong for the Pound?
Nick Palmer of the Office of National Statistics shed some light on the raw data earlier, observing that, ‘while the employment rate continues to hit new highs and there are more job vacancies than ever previously recorded, earnings growth remains subdued and markedly below the recent peak of mid-2015.’

If Palmer is correct and the UK labour market is now beginning to soften, then the outlook for the Pound is likely to rapidly deteriorate. Analysts forecast that such an outcome could send the Pound Sterling euro exchange rate tumbling towards the 1.2200 GBP EUR threshold where it has previously encountered both support and resistance.

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