Following yesterday’s pummelling after Theresa May’s decision to delay the Parliamentary vote on her Brexit deal, the pound is making tentative gains against the euro this morning. This is in part thanks to an upbeat UK labour report. According to data published by the Office for National Statistics (ONS), UK wage growth surged from an upwardly revised 3.1 per cent to 3.3 per cent in October striking a new 10-year high. This places wage growth well ahead of inflation at 2.2 per cent, bolstering hopes that UK consumers will be willing to splash out a bit more this Christmas.
POUND LIVE: LATEST GBP STERLING MOVEMENT HERE
On top of this employment rose faster than expected over the same period with 79k entering employment in October against the 25k forecast by investors.
This coincided with optimism that Mrs May’s meetings with EU leaders could provide the PM with the “further assurances” needed to pass her deal through Parliament.
At the same time, the euro is facing some pressure this morning as the latest ZEW sentiment survey reveals that while economists are slightly more optimistic in their expectations for the Eurozone, the current economic situation in the bloc remains gloomy.
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Looking ahead, Brexit is likely to continue to prompt volatility in the pound euro exchange rate for the remainder of the week.
The pound is likely facing further losses if the Prime Minister is unable to rescue her Brexit deal.
Meanwhile the focus for euro investors will be on the European Central Bank’s (ECB) upcoming rate decision.
While the ECB is not likely to alter interest rates on Thursday, the expected conclusion of the bank’s stimulus programme this month is likely to be welcomed by currency markets.
However it’s likely to be the ECB’s forward guidance that has the greatest impact on the euro this week.
Investors will be wary that the recent slowdown in the eurozone could prompt a more cautious outlook from ECB President Mario Draghi, likely weakening the single currency if he appears to play down the chances of a rate hike in 2019.