The GBP EUR exchange was higher this week as the pair tries to grind higher through the inflationary pressures in the UK. Employment was strong for the UK, while the European economy saw its growth forecasts downgraded. Attention will turn to this week’s PMI figures to see how manufacturing and services are coping in the UK and Europe against a backdrop of various global pressures.
The GBP v EUR was trading at 1.1800 after hitting a high of 1.1900 after the job numbers.
UK employment boosts the pound sterling, inflation still rising
The pound sterling was boosted by jobs this week as unemployment reached the lowest level in the UK since 1974 at 3.7 per cent.
The number of workers on UK payrolls rose by 121,000 to a record 29.5 million between March and April. Chancellor Rishi Sunak said that the Government’s ‘unprecedented support’ had led to the jobs market ‘remaining robust despite global challenges’.
However, the latest ONS data showed that pay excluding bonuses grew by only 4.2 per cent, which means that wages are struggling to keep up with soaring inflation.
Inflation data this week saw the highest levels in 4 years at 9%, with more pressure on Rishi Sunak to help struggling families.
“We cannot protect people completely from these global challenges but are providing significant support where we can, and stand ready to take further action,” Sunak said.
Northern Ireland weighs on pound, EU economy downgraded
The European Commission downgraded its growth forecasts for the European economy this week.
The Ukraine conflict had disrupted logistics and supply chain operations, while rising prices for a broad range of war materials, were weighing on global trade and Chinese production.
In its Spring growth forecasts, the European Commission also said that under a severe scenario, where natural gas supplies from Russia were seriously impacted, the bloc’s growth in 2022 could be ground lower to only 0.2% while consumer price inflation could exceed 9.0%.
The Northern Ireland protocol issue continued to weigh on the pound sterling this week as the UK confirmed that it planned to amend parts of the trading agreement. That brings the threat of retaliatory measures by the EU who are seeking to talk further on the issue despite it dragging on for months.
Joao Vale de Almeida mocked a previous comment made by Boris Johnson, when he said he wanted to “fix, not nix” the deal which was previously agreed during the Brexit talks. At a Westminster lunch, de Almeida added: “It’s not very reassuring if you go into a negotiation where you are presented with two options – either renegotiation or unilateral action to override the treaty.”
Next week will see the release of the closely-watched PMI numbers with the May figures for the UK and Eurozone. German GDP growth and IFO business sentiment will also feature with public sector borrowing figures released by the UK.
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