The GBP EUR exchange rate was 0.33% higher on Thursday with sterling aiming for the yearly highs. Traders have seen the data for the week and are pricing in the interest rate outlook for the pound. Unemployment and growth figures for the UK economy came in at expectations but are still better than some peers.
The GBP to EUR trades at 1.1810 with the yearly highs only 20 pips away.
Pound sterling looking to break new ground for the year
The pound sterling versus the euro is back near the yearly highs and could get there by the weekend.
Traders had taken a mixed view of the recent economic data, but the global economy is being revised lower by the IMF this week. Although the UK is facing threats from inflation and other domestic issues, Europe is seeing stress on the German economy with inflation and supply chain issues.
The reality is that the UK economy is still holding up compared to other developed nations and could follow New Zealand and Poland with an interest rate increase this year.
The CME group have said there is a 72.4% chance that the Bank of England will hike rates in December, according to its Bank of England Watch tool.
CME, which uses its MPC SONIA futures prices to guide expectations, said there is a strong chance the bank will raise rates at its monetary policy meeting on 16th December. There is only 27.7% likelihood of no change before the end of the year, with markets pricing in zero prospect of further easing.
Erik Norland, senior economist at CME Group, said: “SONIA futures markets currently price that the BoE will become the first of the major central banks to raise interest rates following the pandemic with a 21% probability that they move to tighten in November and a 72% chance that they will have moved to higher rates by December.”
“These views probably depend on further strong data pointing to economic expansion, a tightening labour market and rising inflation.”
‘UK should double onshore wind’ to help consumers
RenewableUK have estimated that consumer bills could be reduced by £16.3 billion by 2030 if the government doubled the country’s onshore wind capacity to 30GW.
Yet doing so would only lead to an annual saving of £25 for every household, according to the group. However, the increased onshore wind target would potentially generate £45 billion of economic activity and create 27,000 more jobs in the sector.
Matthieu Hue, Chief Executive Officer of EDF Renewables and Chair of RenewableUK’s Onshore Wind Steering Group, said:
“As it is one of the cheapest ways to generate new power, onshore wind will reduce energy bills for consumers who are being hit hard by massive increases in gas prices.
It can also create tens of thousands of high-quality jobs in parts of the UK which need levelling up.”
RenewableUK’s Dan McGrail said: “We are calling for the government to set a target to double the UK’s current onshore wind capacity by 2030, so we can stay on course for net zero and to reach the Prime Minister’s target of 100% green electricity by 2035.”