EUR GBP Higher as German ZEW Beats Expectations

The EUR GBP exchange rate was higher on Tuesday by 0.13% after Eurozone and German economic sentiment data came in higher. For Germany, it was the first gain in six months as economists grew optimistic that recent struggles will fade for Europe’s largest economy. The country will see the latest inflation figures released today.

The EUR v GBP is trading at 0.8555 after a recent rebound in the euro from yearly lows.

Economists optimistic but German economy still pressured

The euro got a boost as ZEW Institute figures showed optimism in economists’ projections for the next six months. Despite this, the investor assessment of current conditions worsened again this month, dropping by 9.1 points to 12.5 points this month.

ZEW President Adam Wambach said:

“Financial market experts are more optimistic about the coming six months.

However, the renewed decline in the assessment of the economic situation shows that the experts assume that the supply bottlenecks for raw materials and intermediate products as well as the high inflation rate will have a negative impact on the economic development in the current quarter.

For the first quarter of 2022, they expect growth to pick up again and inflation to fall both in Germany and the eurozone.”

The headline data for the week will be released today with Germany inflation data. The previous number was the highest since 1993 and further increases could pressure the ECB to reconsider their dovish attitude.

A policy member has already said that inflation is going to be more stubborn than they had expected even if it proves to be transitory.

UK grocery inflation seen at a 14-month high

Grocery inflation in the UK has hit a 14-month high, according to market research group Kantar. The company said grocery price inflation had risen to 2.1% in the four weeks to October 31st, its highest level since August 2020.

Prices are rising fastest in junk food, while prices of bacon, vegetables and cat and dog treats are falling. Household budgets are being squeezed further at a time when energy prices have risen, petrol and diesel are at record highs, and overall inflation is seen hitting 5% by April.

Fraser McKevitt, head of retail and consumer insight at Kantar, said rising prices are leading shoppers to hunt around for deals.

“Grocery prices are rising and this month inflation hit its highest rate since August 2020, when retailers were still cutting promotions to maintain stock on the shelves.

As prices increase in certain categories, we can expect shoppers to continue to visit several supermarkets and shop around to find the best deals. Already, households visit an average of 3.3 supermarkets per month in order to find the best value for money.”

Kantar also said that shoppers are moving early for Christmas this year, stocking up on mince pies, Christmas puddings and turkeys:

“With Christmas ads out earlier than ever and Christmas stock on the shelves, we’re keen to prepare early this year so we can dive head first into festivities. 4.7 million households bought mince pies this month… Frozen poultry sales are 27% higher year on year, with people spending an additional £6.1 million in the latest four weeks.”

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