The GBPEUR added to early morning gains with a 0.42% rally in the morning session ahead of German inflation data. Bond markets were rocked by higher yields last week and this filtered through to German 10-year Bunds, but they remained in negative territory.
GBPEUR is trading at 1.1580 ahead of the German data at 13:00 GMT.
Inflation Could Move the Pound to Euro Rate
The pound to euro exchange rate could move on inflation if today’s German reading comes in higher than expected. The country’s economy has seen strong performance in manufacturing while the country remains locked down. The inflation picture should be contained by the lockdowns but this will be determined by today’s reading and a higher number could see gains in the 10-yr bund yield. The US 10-yr rallied to 1.4% while the German is in negative territory, but traders may have to move if they expect higher prices on a faster timeframe than central banks expected.
Tomorrow will see employment numbers for Europe’s largest economy, alongside core inflation for the Eurozone. This will give traders something to consider ahead of Rishi Sunak’s budget on Wednesday. Boris Johnson has already threatened to expel any Tory MP who votes against the Chancellor’s budget as he tries to halt a growing revolt over an expected rise in taxes. Sunak is facing increasing pressure over reported plans to increase the corporation tax and potentially capital gains tax.
Labour MP Warns Against Booking Holidays
A group of politicians have urged the British public not to book any summer holidays as the UK confirmed a few cases of a Brazilian virus variant.
Yvette Cooper, Labour MP for Normanton, told the BBC Today show that holiday bookings may not be wise:
“There is a concern about whether the government is raising expectations about summer holidays that they may not be to meet. “This will depend on the relationship between the spread of these new variants and what happens with the vaccine.”
UK households have built up a large savings pot from the continued lockdowns and some of that money would likely be used in a rush to get abroad after being stuck at home for months.
Home Secretary Grant Schapps echoed those concerns, but the news was met with dismay by travel groups, with Save Our Summer scolding MPs for constantly “reaching for the pause button” when a quality testing system would pick up the virus cases.
The GBPEUR has rallied this year on expectations that the UK will reopen more quickly than the Eurozone, but another delay would see some of those gains unwind.
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