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GBP to EUR Higher as UK Inflation Picks Up

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The GBP to EUR exchange rate was higher on Wednesday after the latest inflation release showed a tick higher in fuel and food prices. The Eurozone inflation number will be out later this morning and this could give the market some direction.

GBPEUR was trading slightly higher around the 1.1250 level and tomorrow will also bring a rate decision from the ECB.

 UK inflation Comes in Higher Than Expected

The UK inflation numbers for December came in higher as expected with a 1.4% reading in core inflation, versus expectations for 1.3%. The ONS reported that the Consumer Prices Index (CPI) came in at 0.6% in December versus analyst expectations for 0.5%. The CPI includes fuel and food prices and is growing from the 0.3% in November. Oil prices have gained over the period and will have added to the rise in prices.

The figures for the UK will ensure that the Bank of England stands still on interest rates at their next meeting. The bank’s governor recently said that there was no imminent move to negative rates after the Brexit deal was signed and the rising inflation will underline this decision.

Yesterday saw the release of German inflation numbers and the number came in as expected at -0.3%. The picture in Europe’s largest economy highlights the dilemma for the European Central Bank and later on Wednesday, the Eurozone inflation figure will be released. The market is expecting a print of 0.2% and the likelihood of negative interest rates is higher in Europe.

This is not being portrayed in the exchange rate and the pound still trades at a discount to the prices before the referendum.

Europe Seeks to Overturn its Vaccine Farce

The European Union has been criticized for its failure to order enough vaccines and roll them out quickly. The CEO of Moderna, which manufactured one of the approved vaccines, has said they relied on the use of “vaccines from its own laboratories” too much.

The continent has also struggled to coordinate the interests of its many member states. The result of this issue is that the EU is lagging the UK in its vaccine efforts and this will eventually play into the pound to euro exchange rate. The EU is more interested in readying a move to vaccine passports with a framework set to be agreed by the end of January.

The commission said,

“Vaccination certificates allow for a clear record of each individual’s vaccination history, to ensure the right medical follow-up as well as the monitoring of possible adverse effects”.

The UK is on track to deliver 15 million vaccines by mid-February in the vulnerable age groups and the government is predicting it will offer a vaccine to all by September. Once the economies open up it will allow the UK to see how it can fare outside of the EU bloc.

Ge in touch to discuss these factors in further detail by using the form below.

The post GBP to EUR Higher as UK Inflation Picks Up appeared first on Pound Sterling Forecast.



Source: https://www.poundsterlingforecast.com/2021/01/gbp-to-eur-higher-as-uk-inflation-picks-up/


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