EUR GBP Higher After UK Wages Hit and ZEW Survey Improves

The EURGBP exchange rate was higher by 0.26% on Tuesday after the release of UK employment figures and German ZEW economic sentiment. The UK added 60k jobs, but that was lower than the 125k expected. The unemployment rate still dropped, with a reading of 4.4%. Today will see the latest inflation data for both countries.

The EUR to GBP rate was trading at 0.8375 after finding a bottom at 0.8300.

UK employment improves but wages lower due to inflation

The UK saw 60k new jobs added although this was lower than the 125k that had been expected.

The Office for National Statistics also reported that vacancies had soared to 1.24 million between October and December., despite the Omicron spread.

The other problem for the country is that real wages were shown to have slipped for the first time in over a year as the cost of living crisis looms in the UK.

Kitty Usher, chief economist at the Institute of Directors, said that many had left the jobs market because they’re not well enough to work:

“The good news is that the unemployment rate is now back to within a whisker of its pre-pandemic level but the same cannot be said for the number of people actually employed. The reason for this difference is an increase in the number of people who say they are not available for work.”

“It is also now becoming clear that the Office of Budget Responsibility’s forecast that the unemployment rate would be 4.8% by the end of 2022 is way off the mark. We expect it to be running at under 4% in the not-too-distant future,” she added.

Thomas Pugh, economist at RSM UK said the latest figures could boost rate hike chances.

Indeed, with pay growth at 4.2%, above its pre-pandemic level of about 3%, the MPC is likely to conclude that the labour market is strong enough to absorb higher interest rates.

German ZEW survey jumps more than expected

German economic confidence came in higher-than-expected to a six-month peak in January with the economy expected to pick up over the coming months, according to survey results from the ZEW.

The ZEW Economic Sentiment Index jumped to 51.7 in January from 29.9 in the previous month, which was well above economists’ forecast of 32.0.

However, the assessment of the current economic situation worsened That number dropped 2.8 points to -10.2 in January despite expectations of -8.5.

“The economic outlook has improved considerably with the start of the new year,” ZEW President Achim Wambach, said.

“It is likely that the phase of economic weakness from the fourth quarter of 2021 will soon be overcome”, he added. This assumption is based on the idea that the Omicron variant will disappear in the coming months.

The latest buzzword in European media is a “twindemic” as flu resurfaces this year, following a hiatus last year. According to data released by the European centre for Disease Prevention and Control (ECDC), in December, the number of flu cases in the intensive care units surged.

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