GBPEUR Exchange Rate: Week in Review May 15th
The GBP to EUR exchange rate story this week was a surge in sterling after election results led to an unwind in fear bets. The Tories took some key wins to concentrate their power, including their first ever success in Hartlepool. The Scottish elections also boosted the pound after the SNP secured a fourth term but fell just short of an overall majority. Traders then focused on the prior week’s BoE policy statement, which saw bond buying reduced and UK growth ramped up.
The GBP to EUR rallied from the 1.1600 level into Wednesday, but the pair struggled after that.
Sterling soars on growth, sticks on SAGE warnings
The highlight for the week was the British pound finally seeing strength above the 1.16 level, with the weekly high coming in near 1.17. Unfortunately, those gains ran into warnings from SAGE scientists who said that the June reopening may not happen if the Indian virus variant continues to grow in the country.
Big election wins for the Conservative party strengthened their grip on the country and the SNP’s failure to get an overall majority pushed independence fears further out into the distance. Traders decided to unleash sterling and focus on the Bank of England’s prediction for 7.2% from its previous 5% forecast. The bank also reduced its QE bond buying programme by $1bn per week to $3.4bn.
The pound then hit a wall on Thursday after scientists at SAGE said that the June reopening could be delayed in the UK. The country’s Foreign Office Minister James Cleverly spoke to Sky News and was guarded about the comments over the Indian flu variant.
“Scientists on Sage will make their assessments, they will report that to government, and we will make decisions based on the data and the evidence that they provide,” Cleverly said.
“The Prime Minister, the Health Secretary, have always been clear that the easing of restrictions which allow us to get back to normality will be done at a pace and in a way which is safe,” he added.
The GBP v EUR rate could take another hit if the government moves the goalposts once again.
German and US inflation is a hot topic
German inflation was released this week with the country seeing prices rise to 2%. ECB policymaker Isabel Schnabel had made a comment in the previous day that inflation could reach 3% in Europe’s largest economy and it is likely that she was trying to get in ahead of the number to soothe investor fears. Schnabel repeated the favourite central banker quote du jour, that inflation is a temporary issue, but we have said in this blog for a few weeks that they may be wrong. US inflation numbers smashed their “transitory” dreams on Wednesday with the highest gain in 40 years for prices.
The GBP v EUR exchange rate could be affected by this later as UK inflation may move faster than Europe due to the reopening.
The post GBPEUR Exchange Rate: Week in Review May 15th appeared first on Pound Sterling Forecast.
Source: https://www.poundsterlingforecast.com/2021/05/gbpeur-exchange-rate-week-in-review-may-15th/
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