The GBP EUR exchange rate was higher by 0.13% on Wednesday but the recent trend has been euro strength and that could continue. Traders are winding back bets that the Bank of England will hike interest rates at the December meeting. The OECD still sees the UK outperforming the G7 next year. Europe’s inflation came in at a 24-yr high and traders will also be considering the ECB’s plans.
The GBP EUR was trading at 1.1741 with support at the 1.1650 level.
OECD sees UK outperforming its G7 rivals
The Organisation for Economic Co-operation and Development (OECD) has said Britain is on track for growth to jump by 6.9% in 2021, with a further 4.7% in 2022 and 2.1% in 2023.
That performance would see the country outpace its G7 rivals in 2021 and 2022.
Forecasts for this year are an upgrade from the 6.7% predicted in September, and, while 2022 saw a downgrade from 5.2%, it would still see the UK lead the G7.
“We are concerned that the new variant of the virus, the Omicron strain, is further adding to the already high levels of uncertainty and risks, and that could be a threat to the recovery,” said Laurence Boone, OECD chief economist.
The OECD lowered its global growth outlook in 2021 to 5.6% from 5.7% and left its forecast at 4.5% for 2022, although the report was compiled before the first variant cases.
Meanwhile, Boris Johnson was being criticized for ignoring SAGE advice on travel, but that helps the pound sterling with less restrictions.
European inflation at a 24-year high pressures ECB
Annual inflation for the countries using the euro, including Germany, France, Italy and Spain, soared to 4.9% in November, driven by higher energy prices, according to Eurostat.
The reading marks the highest rate since 1997, when the European Union started collecting data ahead of the euro’s launch, and up from 4.1% in October.
According to Eurostat’s flash estimate, energy prices were 27.4% higher in November. Services inflation came in at 2.7%.
“The surge in headline inflation continues to be mainly driven by higher energy prices, but core inflation also saw a surprisingly strong increase, likely linked to a surge in German package holiday prices,” said Katharina Koenz, an economist at Oxford Economics.
The figures came one day after Europe’s largest economy Germany estimated consumer prices rose by 5.2% in November. German was above 4% for the first time in nearly 30 years in September.
The figures will heap further pressure on the European Central Bank to act and it looks like a government lockdown is the only thing that will backup their ‘transitory’ inflation predictions.
Olaf Scholz will be sworn in next week as Germany’s Chancellor and after the high court ruled that last year’s lockdowns were constitutional, another lockdown could come fast in Germany.
The GBP to EUR has no further high-level data this week and will likely move on virus headlines.
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