January 4, 2022 - Written by John Cameron
STORY LINK Pound Euro Exchange Rate News: GBP/EUR Trades Higher as German Unemployment Figures Print Higher than Expected
GBP/EUR Edging Higher as German Employment Data Misses Forecast
The Pound Euro (GBP/EUR) exchange rate is rising in the beginning of today’s session in response to German unemployment figures printing higher than forecast.
At the time of writing, the GBP/EUR exchange rate is trading at approximately €1.1951, up roughly 0.2% as the new year commences.
Euro (EUR) Falls amid Higher-Than-Expected German Employment Figures
The Euro is slipping against the Pound due to Germany’s December employment change data printing higher than expected this morning.
Although lower than November’s unemployment change of -34K, December’s figures printed at -23K, higher than the expected -15K which is hampering EUR’s appeal.
Germany’s unemployment rate for December dropped from 5.3% to 5.2%, showing a decline in the number of people not in work. This is lower than the forecast which was predicted to remain at 5.3% and considerably lower than the same month in 2020 which reached 6.1%.
Additionally, the evolving coronavirus situation continues to weigh on EUR as 2022 begins.
Alexander Krueger, an analyst with Hauck Aufhaeuser Lampe private bank, said:
‘Due to renewed coronavirus restrictions, the situation will remain tense for the time being.’
However, the German retail sales for November is limiting the single currency’s fall, with sales growth printing at 0.6%, higher than an upwardly revised 0.5% in October and significantly higher that the forecast of -0.5%.
The surprise rise in retail sales came predominately from supermarkets and department stores, with sales increasing by 0.8% and 2.6%, respectively.
On the other hand, despite ‘Black Friday’ and ‘Cyber Monday’ sale campaigns, internet and mail order business appliances fell by 3.1%.
Pound (GBP) Firms amid Coronavirus Optimism
Meanwhile, the Pound (GBP) climbs against the Euro (EUR) this morning as investors are hopeful the Omicron Covid variant won’t disrupt the UK economy as much as previously feared.
Boris Johnson, the UK Prime Minister, has stated that although Omicron, is undeniably more contagious, the effects are milder.
This has boosted Sterling’s appeal on hopes England will continue to avoid tighter restrictions.
Johnson continued to say:
‘I think we've got to recognise that the pressure on our NHS, on our hospitals, is going to be considerable in the course the next couple of weeks, and maybe more.
‘[However, Omicron] …is putting fewer people into ICU.’
On the other hand, GBP is being weighed on by Brexit as negotiations are due to resume, causing political strain on Sterling’s potential.
Jagjit Chadha, director of the National Institute of Economic and Social Research, said:
‘A combination of a ragged edge over Brexit and political uncertainty will continue to hamper what might otherwise have been a strong recovery.’
Furthermore, the final print of December’s manufacturing PMI showed stronger-than-expected growth in the UK's factory sector, with the index slipping from 58.1 to 57.9, beating a preliminary reading of 57.6.
GBP/EUR Exchange Rate Forecast: EUR to be Weakened by Gloomy Data?
As the new year commences, the Pound Euro exchange rate may firm on the back of some lacklustre data from the Eurozone.
Both the Eurozone and Germany are due to print their final PMI for services on Wednesday, and are both forecast to show slower growth at the end of 2021.
The German PMI is expected to shrink to 48.4 from the previous 52.7, whilst the Eurozone's index is predicted to slip to 53.3 from the previous 55.9, though still showing growth.
Later in the week, Europe’s consumer price index is scheduled for release. December’s figures are forecast to report inflation slowed from 4.9% to 4.7% which may weaken the single currency’s appeal as it might relieve some of the pressure on the European Central Bank (ECB) to raise interest rates.
Meanwhile, the Pound is likely to be vulnerable to coronavirus advancements and Brexit negotiations due to a lack of notable data scheduled for release.
Sterling’s appeal may be buoyed should coronavirus cases remain low, preventing the need for restrictions to be reinstated.
However, if Brexit negotiations turn sour, placing strain on the UK-EU relationship, then GBP’s appeal may diminish.
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TAGS: Pound Euro Forecasts