GBP EUR Higher After ECB Meeting Minutes Release

GBP EUR Slumps Despite UK Rates Lift-Off

The GBP EUR exchange rate was 0.35% higher on Thursday after the release of the latest European Central Bank (ECB) Monetary Policy Meeting Minutes. The minutes of the central bank’s April meeting confirmed that the hawks are controlling the discussions. A rate hike in July is now seen as a formality but the euro is losing ground to the pound sterling.

The GBP to EUR is trading at 1.18310 after a few days of confused price action.

ING sees definite rate hike in July by ECB and mulls size

The minutes of the latest ECB meeting provided more evidence to suggest that policymakers at the central bank are now seeing the inflationary threat and will act on interest rates.

“The war in Ukraine and the pandemic measures in China suggested that pipeline pressures and bottlenecks were likely to intensify further, affecting consumer prices over a relatively long period of time,” the report said.

There was also fear over wage inflation with the bank saying, “there could be little doubt that workers would eventually ask for compensation for the loss in real income.”

In terms of the next policy moves, several voting members suggested that the accommodative monetary stance “was no longer consistent with the inflation outlook”, arguing for a faster rate hike path.

The bank also noted that moving too late could also lead to second-round inflation effects and “might have high economic, financial stability and credibility costs if the Governing Council were forced to tighten more aggressively at a later stage in order to re-anchor inflation expectations.”

ING analysts said:

“All in all, the minutes confirmed the increasingly hawkish tone of many ECB members since the April meeting. There seems to be an eerie feeling that the ECB is acting too late and quickly needs to join the bandwagon of monetary policy normalisation. This means that the question is no longer whether the ECB should hike interest rates in July but by how much.”

Boris Johnson arrives for talks on Northern Ireland protocol

Boris Johnson has arrived in Northern Ireland for a meeting with the leaders of the five main parties to discuss changes to the post-Brexit trading protocol.

Some business leaders have urged him to step from taking extreme action over the protocol. But Mr Johnson has said the UK will have a “necessity to act” if the EU will not drop the current checks on goods coming from Britain into Northern Ireland.

The prime minister has confirmed that further details would be released “in the coming days”, despite warnings they could trigger a trade war with the European Union.

The UK Government has also announced further Russian sanctions with the latest target being the airline sector. State-owned Aeroflot, Ural Airlines and Rossiya Airlines will now be unable to sell their unused landing slots at UK airports.

Friday will see the release of retail sales for the UK with a forecasted slump to -7.2% from last month’s 0.9% gain as consumers pull back from spending.

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