GBP EUR Starts the Week at New Yearly Highs

GBP EUR Slumps After German Employment Figures

The GBP EUR exchange rate will start the week above 1.1900 after seeing new highs for the year last week. Stronger employment and higher inflation fuelled another rally in sterling. finding some support last week. The pound will likely get a boost on Monday from Bank of England comments over the weekend and rising virus rates in Europe.

The GBP to EUR trades at 1.1915 on Monday.

Bank of England economist sees December rate hike likely

The Bank of England’s chief economist has warned that the labour market improvements and rising inflation are pushing the central bank closer towards a December interest rate hike.

Huw Pill said the “burden of proof” was now in favour of increasing the borrowing cost, but also  said a rate rise would not be a quick fix in the near term.

Pill, who joined the Bank in the autumn from investment bank Goldman Sachs, added that there were still many uncertain trends and the bank was prepared to wait.

Speaking at an economics conference in Bristol, Pill also suggested that he would vote for a larger increase than financial markets expected, saying he was open to options.

“That reflects a genuine uncertainty at a personal level; that I will want to see how I will assess the situation,” he said.

Markets are expecting the usual deviation of 0.25%, but there was no urgency to do so if a different scale of tightening proved appropriate, he added.

Pill said it was a “pretty uncomfortable time” to join the BoE in September, when inflation was already well above its 2% target and forecast to reach about 5% next year.

“There’s no quick fix, and that lack of a quick fix means some patience will be required,” Pill told the conference hosted by the Economics Observatory and the Festival of Economics.

Germany follows Austria with compulsory vaccines

Protests turned violent in The Netherlands at the weekend over the latest coronavirus restrictions and Austria was warned it was “playing with fire” over mandatory jabs.

Austria will introduce mandatory vaccinations in February as it moved to another lockdown. Germany is set to copy the Austrian moves but in the UK, Conservative MP David Jones has warned: “Austria is sadly playing with fire in making vaccination mandatory.”

“We in this country must never go down that route. Compulsory vaccine is outlawed under the Public Health Act 1984. It must remain so,” Jones added.

The recent decisions have ignited furious criticism and in Austria where there is scepticism about state mandates affecting individual freedoms, encouraged by the far-right Freedom Party, the third biggest in parliament.

Party leader Herbert Kickl added a Facebook post with the statement: “As of today Austria is a dictatorship.”

Europe has been called the epicentre of another virus wave and countries are following each other with lockdown measures, which will slam the brakes on Europe’s slowing economic recovery.

That will provide further impetus for sterling bulls and the 2020 highs at 1.2000 are a possibility in the week ahead.

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