EUR GBP Dumps to New Lows After UK Inflation Surge

The EUR GBP exchange rate was -0.42% lower on Wednesday after the latest inflation data from the UK. The ONS reported that yearly inflation had moved to 4.2% after analysts had expected only 3.9%. The hot prices will likely see the BoE pressured to move in December with a rate hike.

The EUR v GBP was trading below 0.8400 and last year’s lows below 0.8300 would be the target.

UK inflation surges to put pressure on the Bank of England

The latest figures from the ONS have shown inflation moving to 4.2% in October and surging towards the Bank of England’s prediction of 5% by Spring.

A sharp increase in gas and electricity prices have pushed inflation higher to the highest rate since November 2011. The figure surged past analysts’ expectations and sets the stage for a difficult winter as squeezed households may see a rate hike.

Grant Fitzner, the chief economist at the ONS, said it was clear that further pressure was coming in the months ahead after the German government suspended its approval process for the Nord Stream 2 gas pipeline, triggering another rise in wholesale energy prices.

“You will see gas prices have gone up in the last day or two following the announcement from the German government on the Nord pipeline. It’s not clear that energy prices have peaked yet,” he said.

The Bank of England surprised traders by not raising interest rates this month but after yesterday’s strong employment numbers and today’s inflation, they are more likely to act in December.

UK travel experts slam government’s complicated travel rules

Bosses in the UK travel industry have slammed the government’s travel rules for hurting the sector.

The Transport Select Committee said the Government’s plans were “very difficult” and left the UK lagging behind some of its competitors.

Former British Airways CEO, Willie Walsh, said: “The recovery is being hampered by the bureaucracy associated with UK travel. The UK has definitely lagged the recovery. The UK has lost ground to 38 of the other 40 Euro control nations.”

The UK may have been more cautious than other nations, but the EU is moving more towards lockdowns after Austria and The Netherlands imposed partial lockdowns. Germany and Slovakia have now become the latest countries to crack down on unvaccinated citizens.

Hendrik Wuest, premier of North Rhine-Westphalia, said that citizens should demand proof of vaccination or recovery from the virus for all indoor leisure activities.

Other countries are set to follow in Europe and that could suck some of the wind out of the recovery which has already been struggling recently with supply chain issues and inflation is also rising in Europe.

The EU’s annual inflation rate was 4.4% in October, up from 3.6% in September, statistics agency Eurostat said. In the eurozone, annual inflation was 4.1%, up from 3.4% the previous month. The increases are higher than the UK but the market is still expecting the UK to move on quicker path with rates.

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