After rising to a high of €1.1130 this morning, GBP/EUR rates slipped back by half a cent, following the latest UK jobs data. While unemployment and jobless numbers were better than expected, wage growth was lower than forecast at 2.1%. This is important, as it will have a big impact on when the Bank of England will raise interest rates, and the prospect of higher rates will push Sterling higher.
Yesterday’s inflation numbers on their own, would probably lead to the BoE raising rates soon and boosting the Pound in the process. However, with wage growth lagging behind inflation, it’s likely that they will continue holding off until the 2 figures are more in line, so that actual real income is growing. That’s why when this morning’s figures came in at 2.1% the Pound fell by about half a cent (inflation is at 2.9%).
We also had EU employment figures coming in a little higher than markets had expected, giving the single currency a small lift.
All eyes will now be on the Bank of England meeting tomorrow and it could provide some new direction for where the Pound will move. At 12pm we will probably hear that rates have been left on hold at 0.25%. We will also see how the 9 members voted. If 3 or more vote for a hike then it’s likely the Pound may rise a little, but if only 1 or 2 do, then the Pound will probably slip back. The minutes will also show what they discussed, and this will also be important and could move the Pound.
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