GBPEUR Hits Yearly Highs Above 1.17 Before Inflation

GBPEUR Exchange Rate: Week in Review May 15th

The GBPEUR was at risk of a correction yesterday after a move lower through the 1.16 level. The pair snapped back from those losses and is seeing new highs for the year above 1.17.

GBPEUR is up 0.33% on Wednesday with a Federal Reserve press conference in the US later tonight, and the Bank of England’s latest interest rate announcement on Thursday. Before those events we have Eurozone core inflation this morning.

Eurozone Prices will Dominate as Vaccine Fears Relax

Today’s economic calendar brings Eurozone core inflation numbers with the market expecting a dip from last month’s 1.4% figure to 1.1%. Yesterday saw mixed results in two economies with France and Italy seeing 0.2% moves in the opposite direction.

If the European number is higher then it may add pressure to the euro despite the ECB’s recent upgrade to their bond buying efforts.

The European Union’s vaccine outlook improved after the bloc’s drug regulator said on Tuesday that there is “no indication” the AstraZeneca vaccine risked blood clots. Governments will now have to decide whether to restart the rollout after the recent co-ordinated halt, but their vaccine rollout is lagging well behind the EU.

Despite the comments from the agency’s head, many European have still blocked the use of the drug with a review expected to conclude today.

The EMA said they, “will conclude on the information available at its meeting on Thursday 18 March, and issue any necessary recommendations”.

Markets Await Fed Meeting to Support Rally

The key focus of markets today will be an interest rate decision from the US Federal Reserve. None of the developed country central banks are moving any further on their rates with the ongoing recovery, but the policy measures can matter.

The US market doesn’t drive the GBP to EUR rate much but the bank’s thoughts on the recovery and stimulus could play into the EU inflation rate today, and the comments from the ECB last week.

The pound v euro exchange rate looks like it could move for the 1.17 level again, after yesterday’s rebound and a current trading price of 1.1690 on Wednesday. Much of that will depend on the Bank of England tomorrow.

The Threadneedle Street central bank will release their own interest rate and policy update on Thursday, and they will likely undershoot any action from the ECB. Negative rates were pushed back out to summer, but the UK’s vaccine rollout and reopening roadmap means that we may not see them at all in this cycle.

The BoE policymakers have been striking a different tone, with the Chief Economist very bullish, while the bank’s governor was optimistic, but more cautious.

RBC Capital Markets commented, “There was a notable shift between the minutes of the December meeting and those of the February meeting, the latter having jettisoned much of the caution in the former.”

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