EURGBP Could Suffer from UK Jobs Release

The EURGBP exchange rate is higher by 0.15% in early trading on Tuesday but the pair slumped in the last two days and the latest UK jobs number released this morning showed that British job losses were half of the expected -150k drop.

The EUR to GBP rate is trading at 0.8620 and there has been no immediate jobs reaction but it is still early in the session and will weigh on the euro, which has struggled for good news in recent weeks.

Employment data better but workers still suffered

The UK unemployment rate has fallen to 4.9% in the three months to February, according to the latest ONS data release. The latest release is a boost for the country after the expected -150k job losses came in at half of that. The numbers are positive as it reflects the harsh lockdown period at the start of the year when the roadmap for reopening was still unclear and jobs will begin to trend higher as the hard-hit services sector recovers.

Darren Morgan, a director at the ONS, said: “The latest figures suggest that the jobs market has been broadly stable in recent months after the major shock of last spring. There are, though, over 800,000 fewer employees than before the pandemic struck, and with around five million people employed but still on furlough, the labour market remains subdued.”

Despite the figures, there are some who fear that the unemployment rate could be almost double the current levels if it wasn’t for the furlough program. This will be an issue to deal with once the furlough ends and the government’s flip-flopping on lockdowns has probably affected the trust factor in services businesses to make any substantial hiring decisions. Despite this, online job adverts are starting to recover to pre-virus levels as the economy starts to see green shoots of recovery on the horizon.

UK inflation and ECB interest rate update next

The EUR to GBP pair will see the latest UK inflation on Wednesday in what could be an important number for sterling. Core inflation (incl. energy prices) is expected to jump from 0.9% to 1.1%. The key number will be the year-on-year number at 0.8% expected from 0.4%. This would imply that prices are heating up despite continued lockdowns and could give the BoE a headache as the economy reopens.

The outgoing Chief Economist of the bank said previously that an “inflationary tiger” could emerge in the UK and his comments likely angered some of his colleagues at the Threadneedle Street central bank. The policymakers have tried to portray a sober tone and keep market expectations on inflation low, so maybe the move from the Bank of England is part of some damage control.

The ECB will announce its latest interest rate on Thursday but are almost certain to stay put at zero. The ECB may give some updates on further stimulus measures, although no decision will be imminent and euro v pound should be fairly stable.

The post EURGBP Could Suffer from UK Jobs Release appeared first on Euro Rate Forecast.