September 13, 2017 - Written by John Cameron
STORY LINK British Pound to Euro LIVE: Best Exchange Rates Return for UK Currency as BoE Signals 2017 Rate Hike
The pound to euro exchange rate has rallied to fresh best levels today after the Bank of England signaled a rate rise in coming months to combat inflation.
GBP/EUR jumped over one percent to breach the 1.12 handle on Thursday, September 14.
Pound Sterling Slips as Wage Data Disappoints
Sterling dipped this morning as despite the UK’s latest employment data showing that the jobless rate fell to a new 42-year low in July, the accompanying wage data left markets disappointed.
According to data published by the Office for National Statistics (ONS) the UK’s unemployment rate unexpectedly fell from 4.4% to 4.3% in July, however the latest wages data revealed that Average Earnings held at 2.1% over the same period, below the rise to 2.3% that had been previously forecast.
With inflation continuing to soar, reaching an four-year high of 2.9% in August, the lacklustre pace of wage growth means that the gap in real wages is continuing to grow, with many investors fearing that the additional financial pressures being placed on households will lead to a fall in consumer spending.
Markets sentiment was particularly hit by speculation that the lacklustre wage figures will make it even more unlikely that the Bank of England's (BoE) Monetary Policy Committee (MPC) will vote to raise interest rates in the near future as analysts suggest it will place too much of a burden on consumers.
Andrew Wishart UK economist at Capital Economics said;
‘While the continued strength of employment will be welcomed by the MPC, the continued absence of a pick-up in wage growth is likely to keep the doves in the majority. And with inflation reaching 2.9% in August, the squeeze on households’ real incomes probably intensified. That would make the risk of a sharper downturn in consumer spending the overwhelming concern to the majority of the MPC members.’
Euro (EUR) Strengthened as Eurozone Factory Output Rise
Meanwhile the Euro was lifted this morning by the release of the Eurozone’s latest Industrial Production data as factory output rallied from a brief decline at the end of the second quarter.
According to data released by Eurostat industrial production recovered from a 0.6% decline in June to show 0.1% growth in July, in line with market expectations.
The uptick in factory output also helped to boost confidence in the Eurozone’s continued economic recovery, with analysts hopeful that it will support growth in the third quarter.
Economists at Pantheon Macroeconomics said;
‘Stronger production in France and Italy offset small declines in Spain and Germany. Base effects are challenging for the quarter-on-quarter rate in Q3, but survey data suggest that year-over-year growth is accelerating, and we are confident that manufacturing will support GDP growth in Q3.’
GBP EUR Forecast: All Eyes on BoE Following Poor Wage Data
Looking ahead movement in the GBP EUR exchange rate is of course expected to be closely tied to the tone of the BoE’s latest monetary policy meeting tomorrow as investors attempt to determine whether the bank will seek to raise interest rates in the near future.
While economists do not expect the bank to vote to hike rates in its September meeting, markets will be closely watching Carney’s accompanying statement for any clues on the direction of BoE’s future monetary policy, with a possibility of a third policymaker voting for a hike in tomorrow’s meeting like to cause Sterling to jump, although with today’s wage data missing such an outcome looks unlikely.
Meanwhile the Euro may rally on Thursday as investors hope that European Central Bank (ECB) policymaker Yves Mensch will discuss the bank’s potential plans to begin tapering its quantitative easing programme in the near future.
Current Interbank Exchange Rates
At the time of writing the GBP EUR exchange rate was trending around 1.1079 and the EUR GBP exchange rate was trending around 0.9024.
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