GBP to EUR latest; UK unemployment figures are out

Wednesday, 15 June 2011 10:07

Foreign exchange specialist HiFX comment on the latest UK economic data and it's implications for GBP to EUR.

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GBP to USD is 0.134% lower with 1 GBP = 1.6362 USD.

GBP to EUR is 0.533% higher on the day with 1 GBP = 1.1385 EUR.

Chris Towner, director of FX Advisory Services at foreign currency specialist HiFX comments on employment figures released today:

"Just like the weather the current employment picture in the UK appears to be mixed. The claimant count, which measures the number of people signing on rose to its highest levels for 18 months with 19.6k new claimants in May. However, despite this, the broader picture of employment in the economy continues to show the ability of businesses to hold on to jobs and to create jobs, albeit at a tame level.

“The most interesting insight into this employment data is the fact that average earnings are not getting taken in by the inflationary tsunami that we have been witnessing over the past 12 months. With inflation running at 4.5% and average earnings growing at a mere 1.8%, you can see that people need to become a lot more cautious about what they spend their money on in the months ahead. The question is will average earnings play catch up or will inflation eventually drop back down lower. The answer will be in the performance of the economy over the next two quarters, but if the job market starts to tighten the Bank of England will have some monetary tightening to do themselves.

“GBP to EUR initially weakend, but soon found its footing again and looks set to challenge the 1.1550 barrier level, which has been preventing Sterling from strengthening over the past couple of months.”

GBP to EUR climbed by half a cent yesterday as investors look ahead to today’s UK inflation figure, but a weak figure leaves sterling very exposed.

UK inflation remained at 4.5% y/y, with sterling suffering a mild early sell-off due to rumours of a 4.3% figure. The figure rose 0.2% on the month, mainly due to a sharp rise in food prices, ensuring the annual figure stayed at a two and a half year high. The MPC has shown it is (relatively) comfortable with this level of inflation and forecasts it to go higher, so interest rate bets were left broadly unchanged.

"The British pound recovered overnight however, with an excellent consumer confidence survey climbing to a nine month high. This figure is likely to be related to the royal wedding; it is difficult to see this as the start of sustained improvements amid high inflation and squeezed household incomes. Today’s session brings some UK unemployment change and eurozone industrial data. The euro has suffered a sell-off this morning, but sterling doesn’t look strong enough to push too far on from its current $1.1380 level," says Richard Driver, an exchange rate analyst at Caxton FX.