EURGBP Looks for a Rally from the Current Support Levels
The EURGBP exchange rate is still trading below 0.8600 as lower German inflation countered a surge in UK house prices. Today will see the release of German retail sales, Eurozone unemployment and the latest Eurozone inflation rate. Traders will be looking for any signs that producer prices are rising and that could bring tapering talk back to the fore for the European Central Bank.
The EUR to GBP found support last week and will look to get back above the 0.8600 level where it can see further gains.
German inflation slows but ING sees a resurgence
German inflation for June came in at 2.3% y-o-y, up from 2.5% in May. The harmonised index which is preferred by the ECB decreased to 2.1%, from 2.4% in May.
The fall in inflation be short-lived according to ING Bank. In July, the full base effects from the VAT reversal will appear for the first time and it is expected to push inflation above 3%. A continuing surge in inflation alongside what could currently be a breeding ground for second-round effects will see further tapering pressure on the ECB.
Higher producer prices are being driven by supply chain disruptions, higher commodity prices and the reopening of the economy, which is a triple impact on consumer prices.
According to data from German states, prices for household goods, services and hospitality were the key drivers of the latest inflation number, with food and prices for leisure activities taking off inflationary pressure in June.
Wednesday will see the release of Eurozone inflation numbers and the ECB has an inflation outlook of 1.4% in 2023, however traders are watching each inflation release carefully to ensure that the bank is on the right track with its stimulus efforts. German retail sales will lead the Eurozone number and there is also Eurozone employment which is expected to stay stuck at the 8% level.
UK virus cases still rising
UK virus cases are still rising in spite of the new health secretary stating that the current restrictions will be lifted on July 19th.
The UK reported over 20,000 new virus cases and 23 deaths ‘within 28 days of a positive test’, according to official government.
British house prices supported the pound, but it was not enough to move the pair lower. Average UK house prices surged by 13.4% for the year to June, which was the last full month where buyers could take advantage of a stamp duty holiday.
Prices were recorded at £245,432 this month, according to the Nationwide Building Society. That was the highest level since November 2004. The figure is also 0.7% above the May price. The removal of the stamp duty benefit is likely to see prices stall once more and Scotland and London had the slowest pace of growth this month.
The EURGBP exchange rate trades below 0.8600 and may move on the release of the Eurozone inflation number.
The post EURGBP Looks for a Rally from the Current Support Levels appeared first on Euro Rate Forecast.
Source: https://www.eurorateforecast.com/2021/06/eurgbp-looks-for-a-rally-from-the-current-support-levels/
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