The UK economy will have employment levels released on Tuesday and that could drive further gains in the British pound.
EURGBP has dipped below support at the January high around 0.8450. That is the key level to avoid a further drop to the 0.8320 level.
The UK employment levels for April were released on Tuesday at 14:00 HKT. Markets are looking for an improvement from last month’s 206k jobs ahead. Despite the increase in jobs, the unemployment rate is still around 4.4% and the expectation is for 4.4%.
German consumer prices will be released at the same time on Wednesday. Markets expect the indicator to remain at 2.2%. Any deviation could affect European rate outlooks. The country’s new government has inherited a heavy legacy that provides significant challenges to growth, according to QNB. Germany has been the economic powerhouse of Europe since the war, but the last two decades has seen a slowdown.
Negative demographic trends, excess regulatory and tax burdens, and the inability to modernize its industry for the digital age. Germany’s economy has underperformed, with real GDP remaining unchanged in the last five years. This compares poorly with a 12.2% expansion for the United States, or the 5% growth for the rest of the Euro area during the same period.
The incoming administration led by new Chancellor Friedrich Merz wants to create a turning point in economic policy and performance. Decades of fiscal discipline and austerity are about to be abandoned for a massive fiscal expansion package that could reach €1tn, including infrastructure and defence.
Tariffs and trade uncertainty are not leading to a “dramatic” shift in the UK economy, the Bank of England’s chief economist has said, after noting “misleading” views on the impact of the new UK-US trade deal.
Huw Pill’s remarks came after the Bank cut interest rates to 4.25% and lowered its outlook for UK economic growth next year. He said: “I think it is important to say that the analysis in the baseline forecast does not suggest that there’s a dramatic shift in the behaviour of the UK economy, on the back of these trade announcements and trade uncertainty.”
“Local players are now seeking greater US dollar hedging, as well as starting to diversify away from US investments,” he added.
The British pound has mounted a recovery against the euro and will look for further gains from data this week.
