EUR GBP Struggles at 0.8500 After Economic Data

The EUR GBP exchange rate was trading below the 0.8500 level on Tuesday after the latest economic data. The pair is only 50 pips from the yearly lows but is struggling for traction above the current level. UK employment figures were released yesterday highlighting a new record for vacancies, which has supported the pound sterling.

The EUR to GBP rate is trading at 0.8490 and also saw weaker ZEW economic surveys for Germany and Europe.

ZEW economic surveys show weakness, IMF cuts global GDP

The German ZEW survey numbers for October showed that the Economic Sentiment Index worsened to 22.3 from 26.5 while missing estimates of 24.0.

The Current Conditions sub-index also dropped to 21.6 in October versus 29.5 expected. The Eurozone ZEW Economic Sentiment for October was lower at 21.0 despite 37.0 consensus forecasts.

The sentiment index surveys economists on their economic expectations for the 6 months ahead.

In other economic news, the International Monetary Fund also cut global GDP expectations. In its latest World Economic Outlook report, the IMF gave its starkest warning about stagflation, saying that the global economic recovery has lost momentum and become divided, while warning of rising inflation risks.

The fund said threats had intensified with the delta variant, strained supply chains, rising inflation and costs for food and fuel. As a result, the group cut its global growth forecast and now expects GDP to rise 5.9% this year, down 0.1% from July.

But the IMF also noted that the modest downgrade “masks large downgrades for some countries” saying that “the outlook for the low-income developing country group has darkened considerably due to worsening pandemic dynamics”.

Today will also bring the final reading for German inflation in September with the price measure above 4.2% recently. For Germany, the stagflation issue is real as the supply chain problems have had a heavy effect on the vehicle industry.

UK job vacancies at a record high in latest employment release

UK job vacancies rose to a record high of nearly 1.2 million, official data showed on Tuesday, highlighting the issues with worker shortages in a variety of sectors.

In recent weeks we have seen lines at fuel stations as the nation sees a shortage of truck drivers to deliver the fuel, but the Office for National Statistics said shortages were evident in other sectors, including hospitality and transport.

The Institute for Employment Studies estimated that the UK has a shortfall of 900,000 workers between the number of people in the labor market and what would have been expected based on pre-pandemic levels.

“This is being driven by large falls in participation for older people and young people, alongside continued wide employment gaps for disabled people and those with health conditions,” said IES director Tony Wilson.

Analysts seem unwilling to discuss why there are shortfalls, which is due to the government-subsidies handed out during their lockdowns. The UK unemployment rate is now at 4.5% with a further 207k added to payrolls and this boosted the pound as fears over the ending of furlough were cushioned.

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