Pound Euro (GBP/EUR) Exchange Rate Soars as UK Inflation Remains in Double Digits
(Article updated 8:45, 19/4/23) The Pound Euro (GBP/EUR) exchange rate is climbing this morning, following the latest UK consumer price index data.
Inflation remained unexpectedly hot over March, with headline inflation printing at 10.1%. Core inflation held at 6.2%. Because of this, the expectation rose that the Bank of England (BoE) would continue to hike interest rates during their May meeting.
With these elevated bets, the Pound is soaring against all major peers. At the time of writing, GBP/EUR is trading at around €1.1365, a rise of around 0.4% from the morning’s opening rates.
Original article continues below:
Pound Euro (GBP/EUR) Exchange Rate Remains Flat as Upbeat Market Mood Limits EUR
(Article updated 16:21, 18/4/23) The Pound Euro (GBP/EUR) exchange rate is remaining narrow this afternoon, as upbeat trade limits EUR.
Throughout the European session, the market mood has lifted as investors digest the latest Chinese data. Showing a surprise increase in GDP to 4.5%, the economic superpower being in rude health is inspiring investors to seek riskier options.
As such, this is weighing on the Euro due to it’s safer reputation as a currency. However, GBP is unable to fully capitalise on this weakness due to the mixed job data released earlier today.
At the time of writing, GBP/EUR is trading at around €1.1334, showing little movement from the morning’s opening rates.
Original article continues below:
Pound Euro Exchange Rate Narrows amid Shock UK Wage Growth
The Pound Euro exchange rate is trading in narrow bounds this morning, despite surprise wage growth data supporting GBP.
At the time of writing, GBP/EUR is trading around €1.1331, showing little movement from the morning’s opening rates.
Pound (GBP) Boosted by Surprise Wage Growth Data
The Pound (GBP) is enjoying support this morning, following the publication of the UK’s latest wage growth data.
Average earnings including bonuses were expected to cool in February, but instead held ground at 5.9%. This is exerting pressure on the Bank of England (BoE) to continue hiking interest rates.
Markets are now pricing in an 82% chance of a hike to 4.5% in May, whereas this was seen as 70% likely yesterday.
Russ Mould, Investment Director at AJ Bell, commented on the release. He stated:
‘While China’s economic growth has accelerated, so too has UK wage growth which puts the Bank of England in a difficult situation. It muddies the water with regards to the situation with inflation and hopes that the central bank would have enough reasons to stop putting up interest rates.’
Capping Sterling’s gains, however, is likely the increase in unemployment. February’s unemployment rate printed at 3.8%, up from 3.7%.
This may indicate a cooldown in the UK labour market, which may offer a sign that the BoE’s tightening is beginning to take root.
Euro (EUR) Capped by Fall in ZEW Economic Sentiment
The Euro (EUR) is seeing its gains capped this morning, following the release of the latest ZEW economic sentiment index.
The German index fell to 4.1 in April, shocking EUR investors who expected an increase to 15.3. Because of this, the German economic outlook has darkened a touch.
Professor Achim Wambach, the President of ZEW, commented:
‘Economic expectations are negatively affected by several factors. Experts expect banks to be more cautious in granting loans. The still high inflation rates and the internationally restrictive monetary policy are also weighing on the economy.’
However, weakness in the US Dollar amid an upbeat market mood could be supporting EUR.
GBP/EUR Exchange Rate Forecast: UK Inflation in Focus
Looking ahead for the Pound, tomorrow sees the release of the latest consumer price index data. Both headline and core inflation are forecast to have cooled in March, which could weigh on Sterling.
A cool in inflation would likely lead to pared back bets on further tightening from the Bank of England. However, as headline CPI is forecast to remain far above the BoE’s 2% target, there may still be room for a further hike.
For the Euro, Thursday brings the release of the latest European Central Bank Monetary Policy Meeting accounts. If these continue to reaffirm the ECB’s hawkish attitude, the Euro could strengthen.
On the other hand, March’s German PPI figures are forecast to show a fall, which could weigh on EUR. With inflation cooling in the bloc’s largest economy, there may be little need for further hiking.