GBP EUR Fluctuates amid Upbeat UK Wage Growth and Output Reports

December 28, 2017 - Written by Toni Johnson

STORY LINK GBP EUR Fluctuates amid Upbeat UK Wage Growth and Output Reports

The Pound Euro (GBP EUR) exchange rate fluctuated on Thursday, with Sterling rallying in the morning on the back of two positive reports, the first being wage growth figures from Adzuna, and the second being a production output report from the Confederation of British Industry (CBI).

This was, however, short-lived, with the Pound’s upward potential continually limited by a gloomy outlook on the Brexit negotiation front.

GBP Exchange Rates Rally on Rising Output and Wage Growth

The UK’s economy received a small boost on Thursday morning from a study by the recruitment search engine Adzuna, which revealed that average wages for their job listings were up 1.2% over the same month previous year.

This marked the first annual increase recorded by the company since 2015; providing tangible evidence that UK wages are rising, albeit still below the currently soaring levels of inflation.

Another study by the CBI revealed that UK production output growth in the three months to December accelerated sharply.

The Head of Economic Intelligence at the CBI, Anna Leach, shared her thoughts on the readings:

‘Private-sector firms are enjoying healthy activity levels as we approach the year end, but mediocre expectations for growth underline the ongoing challenges facing companies’.

Combined, this news bolstered the Pound, though its lead quickly diminished into the afternoon.

Euro (EUR) Exchange Rates Uninhibited by Bloc Political Woes

Thin trading has left the Euro on predominantly good form this holiday season, even with the recent successful vote for pro-independence leadership in Catalonia and Germany’s current lack of an effective government.

This can, in part, be attributed to the current softness of the US Dollar, with investors avoiding the ‘Greenback’ on a recent fall in US Treasury yields and ongoing market disinterest in the recent sweeping US tax reform measures.

In other news today, the European Central Bank (ECB) has published their economic bulletin for December following the recent monetary policy meeting – and it was predominantly positive.

The most notable revelations were that the bank expects underlying inflation to gradually rise, that they believe the global economy is continuing to expand at a solid rate, and that they believe the Euro area recovery is following suit.

They did, however, note that in order to facilitate a rise in inflation, an ample degree of monetary accommodation is still required.

Because of this, the likelihood for a rate hike from the ECB in 2018 remains limited, even if the outlook is still upbeat.

GBP EUR Forecast: German Inflation Readings on the Horizon

This week’s Eurozone domestic data drought will end on Friday with the release of Germany’s December consumer price index figures; with a year-on-year drop forecast from 1.8% previous, down to 1.5%.

This eventuality could put the EUR GBP exchange rate under increased pressure, particularly with markets lacking many other pertinent ecostats or political revelations to focus upon.

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TAGS: Pound Euro Forecasts