Pound v euro: Exchange rate stagnant after growth in UK wages slows | City & Business | Finance



These came as a bit of a blow to Sterling as well as UK workers as the Office for National Statistics (ONS) reported that domestic wage growth – excluding bonuses – unexpectedly slowed from 2.9 per cent to 2.8 per cent in April.

While this keep wages ahead of inflation at 2.4 per cent, it still came as a disappointment to GBP investors, many of whom are betting on an acceleration in wage growth helping to bolster UK economic growth later this year.

However, fortunately for the pound, the accompanying employment figures proved more supportive, with the ONS reporting the jobless rate held at a 43-year low of 4.2 per cent, preventing any losses in the GBP/EUR exchange rate.

Andrew Wishart, UK economist at Capital Economics, said: “Another strong set of labour market figures in April suggests that firms remain positive about the outlook for demand despite the economy going through a soft patch at the start of the year.”

At the same time the euro is struggling this morning as economists become increasingly gloomy about the Eurozone’s economic prospects.

The ZEW economic sentiment index saw a sharp drop off this month as it plummeted from 2.4 to -12.6, its lowest levels since mid-2016.

The outcome is likely driven by increased trade fears throughout the Eurozone, with economists expressing worries that the increasingly protectionist stance from US President Donald Trump, could hamper the Eurozone’s economic expansion.

Looking ahead, the GBP/EUR exchange rate is expected to rally tomorrow following the publication of the UK’s latest consumer price index.

Economists predict the latest data will reveal UK inflation ticked back up in May, rising from 2.4 per cent to 2.5 per cent, likely strengthening the pound as it bolsters the chances of the Bank of England implementing a rate hike in the second half of 2018.

Meanwhile the Eurozone will release its latest industrial production figures on Wednesday, with an expected contraction in factory output in April being yet another indication that the bloc got off to a sluggish start in the second quarter.


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