The GBPEUR exchange rate is trading around the 1.1660 level after UK inflation jumped ahead of expectations. The market expected a number of 1.5% but the actual figure was 2%. UK Prime Minister also faced pressure from ministers over “shifting the goalposts” with his lockdown delay.
The GBP to EUR is trying to reach for the 1.17 level, with the yearly highs in the pair being at 1.18.
Bank of England target breached
The Bank of England’s 2% inflation target was topped for the first time in two years as UK inflation hit 2.1%.
The price of fuel was one of the big drivers of the May increase, rising by almost 20% from last year to push the inflation figures up from 1.5% in April.
The increase was more than the forecasts by City economists of 1.8%, and means the CPI was higher by the most in six months.
The cost of clothing, meals and pub and restaurant drinks also helped drive up prices, with online sales of computer games and music downloads also being a contributing factor, according to the Office for National Statistics.
Nomura has said it expects inflation to peak at 3.2% while the economic consultancy Capital Economics said the peak was likely to be lower, at 2.9%. The figures could put pressure on the Bank of England to discuss tapering and the removal of stimulus. The central banks ensured the markets that inflation would be temporary but that is now under pressure as the US, Canada and the UK saw prices running hot.
Ministers grill the PM over delays
Prime Minister Boris Johnson survived the Conservative party rebellion as MPs backed his delay to reopening.
Johnson faced a rebellion from some MPs who disagreed with the measures being continued into next month, but the new date was passed by 461 votes to 60.
Mark Harper, who chairs the lockdown-sceptic Covid Recovery Group was concerned that “we’re just going to be back here all over again extending the restrictions”.
But the UK health secretary said the country must learn “to live with this virus” after the four week “pause”. The UK was set to see the final reopening of the lockdown restrictions on the 21st June, but that date has been moved to July 19th.
Conservative Sir Desmond Swayne expressed frustration that the restrictions were never proportionate “even from the outset”.
“I always thought it was wrong for them to take our freedoms, even though they believed that they were acting in our best interests in an emergency, but by any measure that emergency has now passed and yet freedoms are still withheld, and the government will not allow us to assess for ourselves the risks that we are prepared to encounter in our ordinary everyday lives,” Swayne said.
The GBP v EUR has found support at 1.1600 and will now look to get to the 1.1700 level.