EUR GBP Looks for a Rebound from Fresh Yearly Lows

The EUR GBP exchange rate bounced on Monday after seeing new yearly lows on Friday at the 0.8400 level. The Bank of England will meet on Thursday to decide on interest rates and the market knows that the ECB are not going to act quickly enough on rates, while the BoE risks higher inflation if they do act. Europe is also seeing inflationary pressures in the likes of Spain, where energy imports have pushed prices to 1992 levels.

The EUR v GBP is trading at 0.8500 and a move above here could push the euro further.

UK income squeeze to last until late-2023, says OBR

British households will continue to be worse off than before the pandemic until 2023 as rising inflation bites into living standards, the OBR has warned as Rishi Sunak tried to defend his budget.

Charlie Bean, a former Bank of England deputy governor, said that growth in household incomes would effectively stall over the next two years.

Answering questions from Parliamentarians on Tuesday, he said: “We don’t have real household disposable income getting above pre-pandemic levels until the back end of 2023, and it’s growing at a pretty mediocre rate from then on.”

The OBR said last week that inflation would also weigh on incomes over the next two years, before rising by only 1.3% a year on average by 2025.

Meanwhile, Chancellor Rishi Sunak sought to defend his Autumn budget from last week.

“Is it going to happen overnight? Of course these things don’t happen overnight. But we’re putting in place all the things that are required for there to be better wage increases for people over time,” he said.

Sunak was criticized for his big spending budget that failed to tackle inflation and staffing shortages.

Inflation rears it head in Europe despite ECB insistence

Inflation is still rearing its head in Europe, especially in Spain where surging energy costs are pushing broader price gauges higher.

Spanish inflation accelerated to its highest level in almost thirty years, underscoring the continent’s intensifying struggle with surging energy costs. The inflation rate jumped to 5.5% in October, which is the highest since 1992. Germany also saw its inflation rate at levels from the early ‘90s.

Spain is particularly vulnerable to energy shocks with the country relying on gas imports to generate electricity.

Euro-area inflation accelerated more than expected to move above 4% for only the second time in history, adding to the ECB’s headache of aggressive market bets for interest-rate hikes.

Traders are betting that the ECB will fold and have to raise rates early, however, Chief Economist Philip Lane and President Lagarde have pushed back on those bets. The European Central Bank are still strong in their belief that inflation is only a transitory issue.

UK Prime Minister Boris Johnson is due to fly back from Glasgow to London by private jet, despite having lectured the world on climate change at the COP26 event in Glasgow.

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Source: https://www.eurorateforecast.com/2021/11/eur-gbp-looks-for-a-rebound-from-fresh-yearly-lows/