The GBP EUR exchange rate opens the week with German IFO business sentiment data. The index is expected to dip to 91.4 after last month’s 91.8 reading, but a gloomy update would not be a surprise. Meanwhile, the UK Chancellor has said that the government cannot stop inflation, but the Bank of England disagrees.
The GBP to EUR opened the week around 1.1830 after holding lower-level support.
Bank of England economist sees more rate hikes ahead
The Treasury must take responsibility to fight soaring inflation and the current cost of living crisis, according to the Bank of England’s chief economist.
His comments come after also stating that interest rates will have to rise further to fight inflation after already increasing the base rate to 1%.
“Avoiding any drift towards the embedding of such ‘inflationary psychology’ into the price-setting process is crucial,” Pill said in a speech to Welsh Chartered Accountants.
“Tightening still has further to run,” he added.
The Bank had said earlier in May that “some degree of further tightening in monetary policy may still be appropriate in the coming months” – although two dissenting MPC members disagreed.
Rishi Sunak had said of inflation:
“There is no measure any government could take, no law we could pass, that can make these global forces disappear overnight. The next few months will be tough”.
But Mr Pill said that the Treasury should take more responsibility to ease the burden on families. Former chancellor Kenneth Clarke called for welfare increases and said Mr Sunak’s 5p cut in fuel tax and proposed 1p reduction in income tax were “a complete waste of time”.
Another health crisis looms in the form of Monkeypox
The UK could face a “significant rise” in monkeypox cases over the next week, according to health advisors as infections were found in Europe and the US.
A total of 120 suspected cases have been reported globally with 20 in the UK and Belgium has installed a mandatory three-week quarantine for affected patients.
A further rise in infections could hit financial markets and economies that are already reeling from a host of crises. On Sunday, US President Joe Biden said the spread of the virus is “something that everybody should be concerned about.”
“It is a concern in that if it were to spread it would be consequential,” he said.
“There is going to be more diagnoses over the next week,” said Dr. Claire Dewsnap from the British Association for Sexual Health. “How many is hard to say. What worries me the most is there are infections across Europe, so this has already spread.”
Dewsnap added that “It could be really significant numbers over the next two or three weeks.”
On the economic data front, the UK will see public sector borrowing figures and the closely-watched PMI data will be analysed on Tuesday for the UK and Europe. German GDP and a speech from the ECB President will come later in the week.
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