The EURGBP pair has stalled this week at the 0.87 level after better-than-expected employment figures from the UK.
Economic data also showed worsening figures for ZEW sentiment in the Eurozone and Germany.
EURGBP-Weekly Chart
Britain finally got some good news after the unemployment rate hit its lowest level since 1974. The Office for National Statistics (ONS) said the unemployment rate fell to 3.6% during the three months to July. The majority of economists surveyed expected the rate to stay at 3.8%.
However, the figures also showed that the economic inactivity rate rose to 21.7%—the highest level in years. This is due to events such as COVID, where older workers are deciding to leave the workforce through retirement or for health reasons.
Experts say that this will trouble policymakers at the Bank of England because shortages in the workforce have been a factor in rising wage growth and inflation.
That was helped by signs that worker demand is slowing down, with a 34,000 drop in vacancies to 1.27 million. Vacancy levels have been at record highs with the economy reopening. Worker pay was still negative after the ONS said regular pay, excluding bonuses, grew by 5.2% for the period. According to the ONS, after the Consumer Prices Index (CPI) was counted, real pay was 3.9% lower year-on-year V
There was weaker data for the Eurozone and Germany in the form of ZEW economic surveys. For Europe, the expectations of a -58.3 print saw the actual number at -60.7. In Germany, expectations for a drop to 60 saw an actual figure of 61.9 as economists are gloomy about the continent.
Comments from the ZEW Institute said:
“The outlook for the next six months has deteriorated further. The prospect of energy shortages in winter has made expectations even more negative for large parts of the German industry. In addition, growth in China is assessed less favourably (due to lockdowns).”
There will be further data releases this week, with UK inflation on Wednesday and European inflation on Thursday. That should determine whether this is the top of the EURGBP currency pair. The UK inflation rate is expected to come in at 10.2%, up from 10.1%, but a higher figure would rally the pound further.
The pound sterling has been under pressure lately, but the employment figures could spur a revival against the euro.
