GBP to EUR Rate Hits 1.15 as Inflation Rises

The GBP to EUR exchange rate has pushed higher to hit the 1.1500 level that capped prices in April of 2020. The source of the latest move was a rise in inflation, with the UK seeing inflation at 0.7%, compared to forecasts of 0.6%.

GBPEUR is trading just below the resistance but the market could move beyond this price is Boris Johnson gives a promising update at his “roadmap” announcement on Monday.

Rishi Sunak Facing Calls from all Areas to Boost the Economy

UK Chancellor Rishi Sunak is seeing advice coming from all angles as he prepares for the upcoming budget.

Former finance ministers Ken Clarke and Norman Lamont urged Sunak to raise taxes and drop the “triple-lock” election promise. Clarke said that the virus made this untenable, but politicians love an excuse to ditch tough election manifesto tasks.

The numbers are still weak as the UK was able to muster a 1% growth rate for the quarter and 1.2% in December, so the signs are not great for the euro if the UK does open its economy in March. Britain will see its first taste of post-EU trading when it finally opens and that will play a big part in the GBP to EUR exchange rate outlook for the year.

Elsewhere, the IFS has suggested the Chancellor avoids tax hikes and supports the economy in other ways. The Institute for Public Policy Research (IPPR) has warned the UK economy risks falling into a “stagnation trap” if another spending package is not forthcoming and urged a recovery plan worth £190 billion, which is 8.6% of GDP, in their report named “Boost it like Biden”.

After tension last week with fisheries groups over the EU shellfish bans, the road hauliers are concerned about the potential for a fuel duty grab. A report from cross-party MPs, has said the average haulier’s fuel bill by up to £2,250 per year.

The budget could be a controversial one, but investors will be looking for economic support that can power the British economy higher as it reopens for business.

Inflation Still Has Room to Move Higher

After a small rise to 0.7% in January, the UK’s inflation rate remains well below the government’s 2% target. The Bank of England will not be too troubled at the moment about inflation, but the UK has the potential to open its economy more quickly due to its vaccination progress.

The low in 2020 was around 1.2000 in the GBPEUR and if Boris Johnson gives a green light on Monday for the economy to open, the rate could be on a path to that price level. A further rise in the pound would impact on exports and this could keep prices cooler in that area, which will be needed with Brent oil at $64.

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