GBP EUR Higher Despite Dip in Inflation Figures

GBP EUR Higher Despite Dip in Inflation Figures

The GBP EUR exchange rate was 0.10% higher on Wednesday after the latest inflation figures came in less than expected. Despite the cooling, prices are still above 3% and are likely to draw central bank rate hike action. There was also a warning of record petrol prices at the pumps ‘within days’ and that will fuel the inflationary fears further.

The GBP to EUR trades at 1.1865 as it continues to probe new yearly highs.

UK inflation falls unexpectedly in September

The GBP EUR was higher despite the latest data from the ONS showing that inflation had fallen in September, dropping to 3.1% from 3.2% in August.

The fall was largely due to last August’s Eat Out to Help Out discount dropping out of the figures. Inflation is still expected to come in higher for October, when the recent hike in the energy price cap filters through to households.

Meanwhile, UK petrol retailers have said that prices at the pumps could reach record levels by the end of the month.

Brian Madderson, chairman of the Petrol Retailers Association, said that previous records are “almost certain to be eclipsed before the end of October”.

“Current average pump prices across the UK are being softened by some of the largest retailers who typically benefit from a 3 or even 4-week lag to their delivered fuel prices,” he added.

“Global shocks have pushed up prices around the world, and we are working with businesses and international partners to address these pressures,” Chancellor Rishi Sunak said of the inflation figures.

“We are supporting people with the cost of living, including through a new £500m support fund to help vulnerable households, the energy price cap, and assistance with energy bills through the winter.”

Sunak seeks to extend emergency loan scheme

Chancellor of the Exchequer Rishi Sunak plans to extend the state-backed loans for UK businesses. The move will extend one of the measures introduced to support the economy’s recovery from the worst recession in a century.

The Recovery Loan Scheme was set to terminate at the end of this year, but will now be extended for a further six months, according to Treasury sources in the media.

Sunak is looking to spur further investment and prop up struggling businesses after the recovery tapered off and price pressures have risen.

The chancellor unveiled the emergency loans in March which can help businesses rebuild after the pandemic. Under the program, businesses are allowed to borrow as much as £10 million, with the state backing 80% of the loan.

Rishi Sunak has also confirmed that his Autumn Budget will be announced next week on Wednesday October 27th.

The Autumn budget is likely to contain support for jobs after the end of the furlough scheme and a lift in the minimum wage is also being rumoured. In the Spring Budget in March, the minimum wage was raised to £8.91 an hour and is expected to be lifted again to £9.42 in next week’s review.