GBP EUR Flat After German Unemployment Figures

GBP EUR Flat After German Unemployment Figures

The GBP EUR exchange rate was -0.03% lower after German unemployment figures showed that they were close to expectations. A drop of -13k was near the -15k that analysts had forecast. The Eurozone unemployment was 0.1% higher at 6.8% in the latest release on Tuesday.

The GBP to EUR was trading at 1.1880 ahead of the Bank of England (BoE) policy meeting on Thursday this week.

German unemployment sinks in April as pandemic measures ease

German unemployment fell in April, according to Labour Office figures on Tuesday, though the recovery from coronavirus pandemic measures being lifted was affected by the war in Ukraine.

The Federal Labour Office said the number of people out of work fell by 13,000 to 2.287 million. Analysts polled by Reuters had expected a decrease of 15,000, while the jobless rate remained stable at 5.0%.

For the Eurozone, the jobless rate was 6.8% after expectations of 6.7%, but the number was still lower.

“The arrival of spring and the easing of coronavirus measures is supporting the labor market’s continued recovery,” said Federal Labor Agency chief Detlef Scheele. “However, the development is being slowed down by Russia’s war against Ukraine.”

The outlook for Germany’s economy has darkened as the country’s dominant manufacturing sector suffers from input shortages and record prices pressures resulting from the war in Ukraine.

A business survey by S&P Global confirmed that a loss in momentum was seen at German factories this week, while the company warned that the slowdown will eventually affect hiring. Many companies including Volkswagen AG and BASF SE have warned of the risks they’re currently facing.  Services have remained more resilient after virus restrictions were lifted, last week the German government slashed its growth forecast to 2.2% for 2022, down from a previous prediction of 3.6%.

Prices and lack of confidence hurt British businesses

The IoD Directors’ Economic Confidence Index, which measures optimism amongst business leaders for the UK economy, remained very low in April 2022, with a collapse to -34 from its previous level of just below zero.

 

However, confidence in the outlook for their own firms partially recovered from the March low as business leaders reacted to the implications of the Ukraine war.

Kitty Ussher, Chief Economist at the Institute of Directors, said:

“The invasion of Ukraine sent shockwaves around British boardrooms as firms grappled with the impact on their own organisations and those of their trading counterparties. One month on, our data shows many businesses are able to start planning for the future again, with a partial recovery in investment intentions and confidence in their own firm’s future.”

“However, optimism in the UK economy itself remains very low, and is now the number one issue seen as having a negative impact on businesses, even above the other very real pressures of high energy costs, difficulties in the labour market and problems with international supply chains. Business leaders see no early prospect of an improvement in inflation and the overriding mood is one of heightened risk and uncertainty.”