GBP EUR Slumps After German Employment Figures

GBP EUR Higher Ahead of Prime Minister Vote

The GBP EUR exchange rate was lower by -0.44% on Tuesday after the latest German employment figures. Unemployment came in lower than analysts’ expectations with the unemployment rate moving to 5.3%. A UK health chief has called on UK citizens to avoid socialising as the fear of a variant continues.

The GBP EUR was trading at 1.1735 as the pound sterling loses further ground.

German unemployment beats analyst forecasts

German unemployment claims fell more than expected in November, the Federal Employment Agency said on Tuesday.

Jobless claims fell by 34,000 for the month after declining by 40,000 in October. Economists polled by The Wall Street Journal had expected a smaller decline of 23,500.

The country’s unemployment rate was 5.3% in November, down from 5.4% in October and below the forecast of 5.4% of economists polled.

Meanwhile, Germany’s Federal Constitutional Court has ruled that the April-June ‘emergency brake’ restrictions imposed by the government did not breach the constitution. That will give the new coalition government a green light to enact further lockdown measures.

German economists have also said they don’t think the economy will dip into recession with the fourth virus wave and new variant.

“I wouldn’t expect a recession now. We rather expect that we will see a stagnation in the fourth quarter,” Clemens Fuest said.

A government policy adviser said she didn’t think the government would impose a nationwide lockdown, although the incoming chancellor is hinting at mandatory vaccines. Olaf Scholz has said he wants mandatory vaccines by the end of February.

Boris Johnson rejects curbs on socialising

Boris Johnson has rejected the idea that people should curb unnecessary socializing due to the virus.

Dr Jenny Harries, head of the UK’s Health Security Agency, said reducing social contacts “a little bit” will “help to keep the virus at bay”.

The prime minister later said there was no need to “change the overall guidance about how people should be living their lives”.

And Downing Street clarified there would be “no change in our guidance”.

A No 10 spokesperson also said: “The UKHSA is an arms-length body of government, and Jenny Harries provides advice to government, she is not a government minister.”

Despite the government pushing back on restrictions for now, the outlook will be grim if the country keeps logging cases of the new variant. The UK currently only has 14 cases but hysteria reigns with no clarification that this virus is any deadlier than the delta virus, which the government “learned to live with” while case numbers were 30,000 in a day.

Traders continue to unwind their bets on the Bank of England rate hike expected for December as the new virus will give the bank another pass. Policymakers have not given any assurances that they will raise rates and the current fear of lockdowns will likely see the bank skip a meaningful hike before year-end.

The GBP to EUR has breached the Friday support level and could now target the 1.16500 level.

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