GBP EUR Higher as German Inflation Hits 5%

GBP EUR Could Head Lower After Growth Revisions

The GBP EUR exchange rate was higher by 0.40% on Monday, erasing much of Friday’s variant panic selling. German inflation was shown at 5% on Monday with analysts expecting a reading of 4.5%. The number would be a headache for the ECB, but traders will be looking ahead to the deflationary effects of a lockdown.

The GBP EUR was trading at 1.1825 which was the August high and will be initial resistance.

ECB sees November as the inflation peak, Germany at 5%

Commenting on the European inflation outlook, the European Central Bank executive board member Isabel Schnabel said on Monday, “we think that inflation peak has been reached in November.”

Her comments come as Germany logged a 5% inflation number, with analysts expecting 4.5%/ Schnabel added that the central bank sees inflation declining gradually in the coming year, with “no signs that inflation is getting out of control.”

ECB members have been sharing the same view that prices will cool down and that a rate rise would be premature and slow growth.

Germany’s inflation rate was seen at the highest level since 1992 and the Bundesbank do not see a peak, with the bank expecting a peak near 6%. However, the Bundesbank also predicts inflation will retreat in the coming months. The travel-related element will “lapse in December and the VAT base effect in January,” a report said.

Scotland logs cases of the new virus variant

Scotland has reported six cases of the new coronavirus variant with the country joining Wales in asking Prime Minister Boris Johnson to tighten travel restrictions.

In a joint letter, Nicola Sturgeon and Mark Drakeford asked for people arriving in the UK to be forced to self-isolate for eight days. Meanwhile, Sturgeon has suggested that citizens take a lateral flow test every time they wish to mix with others outside of the household.

The UK Health Minister, Edward Argar, has said he expects further cases in the UK and added:

“We’ve seen three confirmed cases in England. But I think we’ve been clear since we first knew about this new variant that we would expect to see the number of cases rise. And I think what we’re seeing in Scotland reflects that. That’s in the nature of the virus, and the likely – not certain but likely – increased transmissibility of this variant.”

Cases are also rising in Italy, where the country will introduce a super green pass from December 6th to ban unvaccinated citizens from indoor venues. These moves are largely political after the doctor who found the variant said cases were mild, while the vaccine maker Moderna has said that it will take two weeks to judge if vaccines work for the new variant. The end result is that the UK looks to be joining Europe in seeking another bout of lockdowns which could see Christmas cancelled.

The GBP to EUR will have support at the Friday low of 1.1770 as the week continues.

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