EUR GBP Pauses Ahead of UK Economic Data

The EURGBP exchange rate was flat on Thursday as the UK awaits consumer confidence and retail sales data. Boris Johnson announced another easing of virus rules for the UK across the next week. The Bank of England governor was also speaking on interest rates yesterday.

The EUR to GBP rate was trading at 0.8330 and is looking for a catalyst to mount a rally.

Bank of England governor sees energy prices elevated this year

The Bank of England governor was speaking at the Parliament’s Treasury Select Committee, where he said inflation could remain a problem.

Bailey said the Bank’s regional agents were seeing some evidence of second-round inflationary effects. He said there is a concern of “second round effects” on wages from both rising inflation and a “tight” jobs market.

This is a sign that inflation in the UK is no longer only being driven by external factors – such as oil and global supply chain bottlenecks – but by issues closer to home, which the Bank can address via monetary policy.

Bailey said the labour market is currently “very tight” in terms of supply, with too few applicants chasing the 1.24 million vacancies seen in this week’s jobs report. This puts upward pressure on wages, which further adds to the inflation rise.

Bailey said the Bank “can and will do” everything it can to control inflation.

Rishi Sunak commented on inflation being at a thirty year high, saying: “I understand the pressures people are facing with the cost of living. We will continue to listen to people’s concerns as we have done throughout the pandemic.”

UK moves to drop all plan B covid restrictions

Boris Johnson announced a further easing of restrictions as the move to drop Plan B restrictions gets underway.

Face masks will no longer be made mandatory in public places and schools, while the NHS passports will be dropped for large events with infections lower in large parts of the country, Johnson said Wednesday.

The Prime Minister told Parliament that the restrictions were being eased because government scientists believed that the surge of infections from the latest variant “has now peaked nationally.”

The work-from-home guidance was dropped and Johnson also said:

“We will trust the judgment of the British people and no longer criminalize anyone who chooses not to wear one,” Johnson said.

This is a huge U-turn for the UK government after two years of draconian rules and it may be that the Tories are trying to reverse a gaping hole in the polls, with Labour 12 points ahead.

The day ahead will see retail sales and consumer confidence released for the UK after jobs data and inflation pointed to a potential rate rise at the BoE’s next meeting. Markets are expecting policymakers to raise rates to 0.50% in their next meeting.

France was also looking to ease restrictions with a timetable set out later tonight, although the move will be slower than the UK.

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