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Pound Euro Exchange Rate News: GBP/EUR Steady as UK Wage Growth Misses

February 19, 2019 - Written by John Cameron

Pound (GBP) Exchange Rates Flat as UK Wage Growth Stalls

The Pound Euro (GBP/EUR) exchange rate traded in a narrow range on Tuesday morning after the UK’s latest labour figures failed to elicit much of a response from GBP investors.

This likely comes as a result of UK wage growth undershooting expectations at the end of last year.

According to data published by the Office for National Statistics (ONS) UK wage growth (including bonuses) held at a decade high of 3.4% in December.

This felt short of economists’ expectations that headline wage growth would have continued to have accelerated to 3.5% and broke a five-month run of consecutive rises.

This stalling in wage growth comes despite the number of people in work in the UK reaching a record high of 32.6 million after the workforce expanded by a further 167,000 in the fourth quarter.

This had no visible impact on headline unemployment however, which held at 43-year low of 4%.

ONS deputy head of labour market Matt Hughes said:

‘The labour market remains robust, with the employment rate remaining at a record high and vacancies reaching a new record level.’

However some analysts warned that the growing number of vacancies may be a sign that economic growth could slow later this year should UK business faces a labour shortage in 2019.

Suren Thiru, head of economics at the British Chambers of Commerce warns:

‘The uplift to consumer spending from the recent improvement in real pay growth is likely to be limited by weak consumer confidence and high household debt levels.

‘The increase in the number of vacancies to a new record high confirms that labour and skills shortages are set to remain a significant a drag on business activity for some time to come, impeding UK growth and productivity.’

Euro (EUR) Exchange Rate Muted as German Economic Sentiment Remains Gloomy

Meanwhile the Euro (EUR) also remained subdued on Tuesday morning, following the release of the latest ZEW economic surveys.

According to the data compiled by ZEW Germany’s economic sentiment index showed a slightly better-than-expected improvement in February, with the index rising from -15 to -13.4, beating forecasts of a more modest improvement to -14.

However the index also clearly remained in negative territory this month as economists remained mostly gloomy regarding Germany’s economic outlook.

Economists pointed to disappointing industrial production and weak international demand as reasons for concern, while also being spooked by ongoing trade and Brexit uncertainty

Germany only narrowly managed to avoid slipping into a technical recession at the end of 2018 and it appears economists fear this trend of lacklustre growth will persist through the first half of 2019.

Commenting on the survey ZEW President Achim Wambach said:

‘At the moment, we do not expect a rapid recovery of the slowing German economy. The economic situation in Germany has been weak, especially in the manufacturing sector.

‘For the next six months, the financial market experts in our survey do not expect any improvement.’

GBP/EUR Exchange Rate Forecast: Euro to Tumble as Eurozone PMI Readings Continue to Disappoint?

Looking ahead to the remainder of the week, the Pound Euro (GBP/EUR) exchange rate looks set to advance as the Eurozone publishes its latest PMI figures.

Economists forecast that February’s PMI readings will reveal that growth in the bloc’s private sector continued to slow, likely driving the euro lower as it adds to concerns regarding the current state of the Eurozone economy.

Meanwhile GBP investors are likely to be focused on political developments in the UK, with both Brexit and the recent split in the Labour party likely to be in the spotlight.

In regards to the latter analysts at ING forecast that Sterling could strengthen if some bigger names from the party make moves to exit the party on hopes it would push the leadership to adopt a more pro-EU stance.

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