The GBP EUR exchange rate moves into July with a 0.47% gain after a very steep gain in German unemployment. Analysts saw the unemployment rate jump from 5% to 5.3% as 133k jobless were added. The figures edged higher due to Ukrainian refugees seeking work in the country. In the UK, Boris Johnson said that defence spending in the country will increase towards the end of the decade. UK house prices dipped but came in near analysts’ expectations.
The GBP to EUR is trading at 1.1660 and will look to advance from this support level.
German unemployment rockets higher, boosting sterling
Germany saw its unemployment rate rise in June, according to the latest Labour Office figures on Thursday, as Ukrainian refugees joined the workforce.
The Federal Labour Office said that the jobless number jumped by 133,000 in seasonally adjusted terms to 2.4 million people out of work. Analysts were caught out by the changes with an expected decrease of 6,000. The unemployment rate also increased to 5.3% from last month’s 5%.
“The labour market overall remains stable,” said Detlef Scheele, the Labour office chief. Although unemployment jumped, “this increase is due to the fact that Ukrainian refugees are now being recorded at job centres and are thus visible in the labour market statistics.”
Germany took 800,000 Ukrainian refugees, according to the country’s Chancellor Olaf Scholz. However, some believe the actual number to be a lot higher.
The Labour market shrugged off the current figures, but it will likely weigh on employment in the months ahead.
Defence spending to be higher in the UK, PM says
The UK Prime Minister said that the country will increase defence spending to 2.5% of GDP by the end of the decade.
Boris Johnson commented that the “cost of freedom” is “always worth paying” as he spoke of the desire to invest in air combat capabilities and adapt to a “more dangerous” world.
The country’s defence secretary advised that the spending hike will be needed by the year 2028. Ben Wallace asserted the investment in defence must grow “before it’s too late”, but he later denied that the 2.5% level was his request.
UK housing prices released by Nationwide showed a dip to a 10.7% annual increase. Analysts expected 10.8%, which is a good sign that the interest rate hikes are not causing a steeper decline. That may change in the coming months as cost-of-living issues filter through to the British economy alongside the steep rate increases.
Nationwide’s chief economist, Robert Gardner, said:
“The market is expected to slow further as pressure on household finances intensifies in the coming quarters, with inflation expected to reach double digits towards the end of the year.”
Moreover, the Bank of England is widely expected to raise interest rates further, which will also exert a cooling impact on the market if this feeds through to mortgage rates,” he added.
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