Pure FX Blog

18 May 2017

Euro Touches 7-Week High Versus Pound, as UK Wage Growth Eases

Euro Touches 7-Week High Versus Pound, as UK Wage Growth Eases

The euro to pound interbank exchange rate has hit 0.8609 today, its highest since March 29th, as UK wage growth fell to 2.1% in March. Image credit: William Lepretre.

by Peter Lavelle

Welcome to Pure FX’s latest update of the euro to pound interbank exchange rate.

The common currency rises versus sterling! The euro to pound interbank exchange rate has hit 0.8609 today, its highest in 7 weeks, or since March 29th.

The euro has strengthened against the pound, because UK wages growth eased -0.1% in March compared to a month before, said the Office for National Statistics yesterday, to 2.1%.

This has weighed on sterling, in particular because UK inflation rose +2.3% in March, meaning that price rises outpaced salary rises by +0.2%, thereby squeezing living standards.

What’s more, the Bank of England forecasts that UK inflation will rise to close to 3.0% in Q4 2017, telling us that UK living standards may come under further pressure, and weakening the pound.

This has dragged down sterling, because if inflation rises higher than wages, Brits may have less money to spend at the shops, thus slowing down the UK’s economic growth!

Euro strengthens, as Eurozone inflation hits target

Moreover, the euro has also strengthened against the pound, because Eurozone inflation hit 1.9% in April, said official data yesterday, thus reaching the European Central Bank’s official target.

This has lifted the euro, because with inflation on target, the ECB may be more likely to cut back its extraordinary monetary stimulus, as well as lift interest rates above their current 0.0%.

In particular, European Central Bank policymaker Benoit Coeure said yesterday that the central bank shouldn’t wait too long before easing its stimulus, to avoid surprising the financial markets.

This has strengthened the euro, because if the ECB lifts interest rates, this will make investing in the Eurozone more profitable for international investors.

With all this in mind, the euro to pound interbank exchange rate has hit this 7-week high today!

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We’ll tell you when the euro strengthens against the pound.

Please bear in mind, this article is Pure FX’s opinion only and does not constitute advice. Moreover, the exchange rates referred to in this article are the interbank rates, which are the rates at which banks and financial institutions buy and sell currency to each other. Therefore these exchange rates cannot be accessed by individuals or SMEs, and are not the same rates that Pure FX can offer. To get a free exchange rate quote, call us on +44 (0) 1494 671800, or email peter.lavelle@purefx.co.uk.

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