EUR GBP Higher Ahead of German Employment Figures

The EUR GBP exchange rate was slightly higher again on Wednesday, but the pair bounced off the 0.8650 resistance. Thursday brings a final reading of UK GDP, but there is German data in the form on employment and inflation.  The UK furlough scheme ends today, bringing question marks about the UK economy.

The EUR to GBP rate trades at 0.8635 ahead of the latest data.

German economic data to drive the EUR v GBP

The euro versus the pound will have economic data today as the UK sees a final confirmation for Q2 GDP. The annualized figure came in at 22.2% and may not stray too far from previous estimates.

The key numbers ahead are German unemployment and inflation. Unemployment is set to dip to 5.4% from 5.5% in Europe’s largest economy. The previous month saw 55k less unemployed in the country and this month is forecast to see a -33k drop. Germany’s economy was also boosted by consumer confidence levels this week.

Inflation has been an issue for economies and Germany’s latest reading is expected to rise to 4.2% from 3.9%. The Bank of England were forced to concede that rates may have to rise on inflation and a higher reading would put pressure on the ECB to consider the options for Germany.

The UK is grappling with an energy crisis after a further three firms ceased trading on the rise in wholesale gas prices. There was also a further squeeze as oil topped $80 a barrel amidst panic buying at UK forecourts, driven by BP’s closure of retail outlets.

The British consumer is being squeezed on multiple fronts as energy prices align with higher budget taxes and national insurance contributions. Today also sees the end of the furlough scheme which had supported millions of workers in the pandemic. It is hoped that the record level of job vacancies in the country will shoulder some of the burden.

ING sees a ‘rough patch’ for UK economy in the winter months

ING analysts said that the British economy could go through a rough patch in the winter.

Discussing the Bank of England’s hawkish switch, the bank said:

“…our economics team stresses that the UK will likely go through a rough patch over the winter months. This would make policy tightening incongruous. More importantly, the questionable case for imminent tightening hinges on an acceleration in wage gains.”

The team also saw the gap widening between EUR rates and GBP rates, saying:

The (ECB) central bank is also still following a very dovish playbook, even if hawkish surprises might still emerge as the discussions going into the all-important December meeting gain momentum… the inflation estimate for September is likely to show increasing price pressures might seem like a viable flashpoint next week, though we have assurances of ECB officials of being “vigilant, but not worried.”

“The chasm between EUR rates and their GBP and USD peers is set to widen further,” ING added.

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