EUR GBP Dips as ECB Sees Inflation Peak in November

The EUR GBP exchange rate was -0.16% lower on Monday after an ECB policymaker saw inflation peaking in the November data. The comments came as Germany posted inflation at 5%, with analysts expecting only 4.5%. Meanwhile, the UK has joined Europe in the panic over the latest virus variant with Scotland and Wales urging travel curbs.

The EUR v GBP trades at 0.8460 after another attempt to take the resistance at 0.8500.

European central bank hopeful that November was the inflation peak

European Central Bank executive board member Isabel Schnabel said on Monday, “we think that inflation peak has been reached in November.”

Her statement came despite Germany seeing a 5% reading for the month, with analysts expecting 4.5%.

She added that, “there are no signs that inflation is getting out of control” and that it “won’t continue at the same pace as in the past few months.”

Central banks have long said that inflation was only transitory, but it may be another round of lockdowns that proves them right, rather than economic rebasing.

The Bundesbank had tipped German inflation to reach a peak near 6% but also said that the rate should fall in the coming months. German inflation saw a three-decade high on Monday, a day before the highly anticipated consumer-price report for the euro area.

Bundesbank President Jens Weidmann had already warned of sticky rates on Friday, saying it’s possible euro-area inflation will remain above the 2% target in the medium term and not slow as quickly as many of his ECB colleagues currently predict.

Tomorrow will see German unemployment figures, alongside the European CPI inflation figures. Traders may not pay much attention to the CPI after the ECB comments and will also be looking ahead to the potential deflationary effects of further lockdown measures.

Europe starts to log coronavirus variant cases

Europe is seeing countries register new coronavirus cases as Scotland and Wales asked Boris Johnson to introduce quarantines.

There were thirteen cases identified in the Netherlands on Sunday, with Scotland reporting six on Monday. The virus variant was only producing ‘mild’ symptoms, according to the doctor who found the first cases in Africa, but governments have jumped into action.

Scotland and Wales have asked Boris Johnson to impose an eight-day quarantine on new arrivals into the UK.

The Chief Medical Officer at vaccine-maker Moderna also said that the virus is likely to elude the current vaccines, with a new one available in early-2022. The company said it will take two weeks to find out the status, but governments cannot expect nations to roll up their sleeves for another two vaccines after they admitted the first two didn’t stop the spread.

The pound sterling recovered some of the panic selling from Friday, but this could be the start of another virus saga with potential Christmas lockdowns destroying the already-faltering economic recoveries.

There is no high-level economic data after Tuesday and the pair will move on virus headlines.

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