The GBP EUR exchange rate was 0.36% higher on Tuesday after jobs market figures were better than expected. For the first time ever, there are more job vacancies than people to fill them, and wages are also rising. Employment surged by 83k in the three months to March, compared with the previous three months to December.
The GBP to EUR touched 1.1900 on the day with the pair dropping back to 1.1850.
BoE governor warns of ‘apocalyptic’ food prices
Andrew Bailey responded to criticism that the Bank acted too slowly amidst soaring inflation, blaming a “bad situation” on external shocks including the war in Ukraine and the lockdown in China.
“We can’t predict things like wars – that’s not in anybody’s power,” he said.
He said he does not think the Bank could have done much to prevent soaring prices. He added that the conflict in Ukraine had pushed up energy prices, which are the biggest driver of inflation, while the lockdown in Shanghai has worsened increases in the cost of goods due to its effect on supply chains.
“The inflation risk factor that I am going to sound rather apocalyptic about is food,” he said.
He said he spoke to Ukraine’s finance minister in Washington earlier this month, who says that farmers will be able to plant crops this spring but have “no way” of shipping them out.
“Ukraine does have food in store, but it can’t get it out at the moment,” he said.
Mr Bailey said the Bank also underestimated the number of people who would leave the labour market after the pandemic receded, which is leading to labour shortages.
Michael Saunders, of the Bank of England’s Monetary Policy Committee, added that “there is no sensible monetary policy that could have held inflation at 2% this year”.
Fuel prices are also still an issue with diesel prices at a new record high with retailers blamed for hiking prices are the 5p per litre duty cut.
UK employment surprise as March figures beats estimates
Employment in the UK boosted the pound sterling with an 83k surge in new positions for the three months to March, compared with the previous three months to December.
The figure saw the unemployment rate falling from 3.8% to 3.7% with claim counts falling by 56.9k versus a forecasted 42.5k decline. In March, claimant counts fell by 46.9k.
However, the Office for National Statistics (ONS) highlighted the mounting cost-of-living crisis, revealing that regular pay, excluding bonuses, dropped by 2.9 per cent in March when taking Consumer Prices Index inflation into account – the biggest fall since November 2011.
Darren Morgan, director of economic statistics at the Office for National Statistics, said: “Continued strong bonuses in some sectors such as construction and especially finance mean that total pay is continuing to grow faster than prices on average, but underlying regular earnings are now falling sharply in real terms.”
Inflation will be another talking point this week as the UK sees the release of its inflation rate later in the week.
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