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Pound Exchange Rate Climbs on Brexit Optimism and UK Wage Growth (GBP/EUR, GBP/USD)

September 11, 2018 11:06 am | Modified September 11, 2018 11:18 am
Brexit, GBP, Politics | BY Ashleigh Fox

The Pound remained in a tight range against the US Dollar (GBP/USD) and Euro (GBP/EUR) exchange rates on Tuesday after economic data showed an upswing in UK wage growth. 

Pound Exchange Rate Supported by Brexit Optimism and UK Wage Growth

The Pound to US Dollar exchange rate broke through the 1.30 key psychological barrier on Monday and held above this level approaching midday in Tuesday’s trading session. GBP/USD has so far today traded between interbank lows of 1.2988 and highs of 1.3086. Meanwhile, the Pound to Euro exchange rate traded at levels of 1.12 after a brief sashay down to 1.11.  The GBP/EUR currency pair has been trending between 1.1187 and 1.1250 so far in Tuesday’s session.

UK economic data showed a 3K change in employment in the three months through July, a little lower than the 9K forecast and significantly below the previous 42K reading. Meanwhile, the Unemployment Rate remained steady at 4.0%. One positive to the raft of labour market data was the latest wage growth numbers. Average Weekly Earnings including bonuses rose from 2.4% to 2.6% on the year in July, while excluding bonuses the ecostat jumped from 2.7% to 2.9%, both numbers beat expectations. The July number alone showed an increase in earnings to 3.1%, the strongest increase in three years.

Moreover, more jobs are being created; the number of vacancies rose to 833,000 in the three months through August which tops the tables as the highest number since records began in 2001.

Sterling has been on a rally this week following hints from EU chief negotiator Michel Barnier who seems to have had a change of heart in the Brexit debate. As the likelihood of a deal increases, the Pound exchange rate has been able to gain some support.

German Sentiment Declines while Eurozone Expectations Improve: US Dollar Steady

Meanwhile, in the Eurozone, the currency bloc’s powerhouse Germany has seen another interesting decline in economic expectations. The ZEW Expectations Survey showed a fall from -13.7 to -14.0 in September, despite forecasts to improve marginally to -13.5. However, ZEW’s Eurozone Economic Sentiment Survey showed an improvement from -11.1 to -7.2 in September.

Stateside, US President Donald Trump has been creating market movement as potential trade war disputes heat up. The US Dollar has gained off the back of comments regarding tariffs, but if the impact appears to damage the US economy, safe-haven assets could surge in popularity.

Industry expert Benjamin Lu commented: ‘The imposition of increased tariffs (between the United States and China) will indefinitely damage global economic conditions in the longer term … However, safe-haven demand remains weak for the shorter term as markets fixate on stronger dollar prospects.’

The Pound to Euro exchange rate is trading at interbank levels of 1.1240. The Pound to US Dollar (GBP/USD) exchange rate is trending in the region of 1.3022.

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