GBP EUR Exchange Rate: Weekly Review January 22nd  

GBP EUR Exchange Rate: The Week Ahead March 13th

The GBP EUR exchange rate was strong this week as economic data supported the rate hike picture and the Prim Minister moved to drop the Plan B restrictions within the next few weeks. Jobs data was mixed, but inflation at 30-year highs was the catalyst and the BoE governor Andrew Bailey admitted that energy costs could remain inflated, while secondary effects in food and clothing were being seen.

The GBP v EUR was heading for the weekend trading at 1.2030.

Employment data and inflation could see another rate hike

The pound sterling versus the euro started the week with data on Tuesday and the UK added 40k new jobs. There was some gloom as vacancies hit a record 1.24 million high, while real wages fell for the first time in a year due to inflation. The euro also got a lift as ZEW sentiment from Germany jumped higher than expectations.

The ZEW economic research institute said its economic sentiment index rose to 51.7 from 29.9 points in December, with expectations for only 32.0.

“The economic outlook has improved considerably with the start of the new year. The majority of financial market experts assume that economic growth will pick up in the coming six months,” ZEW President Achim Wambach said.

That data was followed a day later by another strong inflation number as the UK inflation rate jumped to 5.4% year-on-year on expectations. Food, clothing and energy prices were the driver but prices were higher in all sectors.

“That is a very great concern,” Bailey told the parliament’s Treasury Committee on Wednesday. “If you think about the relationship between transitory and these second-round effects that can make it much longer, that again is a source of pressure in this story, which is a concern.”

Bailey said the labour market also looked very tight and said it was a key factor for raising interest rates in December.

Asked about the squeeze on living standards, Bailey said: “We can and will do everything we can do, I can assure you of that.”

The pound sterling was awaiting retail sales and consumer confidence data on Friday but attention will turn to the next BoE meeting and that will keep sterling elevated.

UK government moving to ditch plan B restrictions as Omicron fades

The UK Prime Minister announced on Thursday that work-from-home guidance would be dropped. He also said that masks would no longer be mandatory from next Thursday, while the ill-fated NHS app will be dropped completely.

Some were concerned that dropping the restrictions too fast would be a risk, but Johnson will want to boost his flagging ratings, with the Tory party caught up in a civil war as they await the Sue Gray inquiry that could see the PM ousted.

The French government were also set to release a timetable on Thursday evening for the easing of restrictions. The government are saying it is due to the health pass, but governments in Europe seem united in their U-turn of restrictions.

Friday was set to see consumer confidence for the Eurozone and a speech from the ECB Chief Christine Lagarde.

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