EURGBP Lower as Traders Weigh Up Economic Outlook

The EURGBP exchange rate has paused at the 0.8685 level as traders decide on the outlook for the UK and European economic outlook. The next data won’t be released until tomorrow with German inflation, but the lockdown in the country should ensure that the prices remain pressured and it likely won’t be a big mover for the euro vs pound rate.

The EUR to GBP rate is trading at 0.8675 and a breakout above that level could continue to see gains in the euro with 0.8900 being the target.

US Inflation Higher but Europe Unlikely to Follow

US headline inflation figures rose to 2.6% in March, which was higher than expected and the highest level since August 2018. The core CPI reading at 1.6% was also higher than expected. The numbers come as the US leads the way on vaccines and starts to reopen its economy. The higher inflation numbers are likely to be a factor for the British economy in coming weeks as it moves to the next phase of its own reopening and after months of lockdown, retailers for example, won’t need to make any price cuts to tempt shoppers.

The irony of the higher inflation that could show up is that the most hawkish Bank of England member announced he was leaving the bank yesterday. Andy Haldane was the Chief Economist at the bank and earlier in the year he referred to an “inflationary tiger” that was set to be unleashed in the country. His comments were not in line with the other bank members and far removed from their stoic language on keeping prices contained and rates lower.

Thursday and Friday will bring the release of the latest inflation numbers for the German and European economy, but these are unlikely to follow the path of the US after a recent colling in European growth.

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