The GBP EUR exchange rate was higher after the latest French elections. French President Emmanuel Macron lost his absolute majority with a surge in opposition voters. The week ahead will see inflation released for the UK, adding pressure to the government after a weekend of protests over rising costs.
The GBP to EUR dipped below 1.1500 but rallied 200 pips to trade above the 1.1700 level.
Bank of England still in focus over inflation threat
The Bank of England will be in focus again this week with inflation numbers coming for the UK.
Wednesday’s figure is expected to rise from 9% to 9.1% but there is every chance that it can overshoot those levels. According to predictions, the monthly figure will rise by 0.6% which will be much lower than last month’s 2.5% reading.
Further rate rises could push the economy near a recession and hurt the housing market. So, the central bank is really in a tight spot but following the lead of the US Federal Reserve which is going aggressive on its rate hikes.
The Bank of England and the UK government have both signalled further action after real wages fell at their fastest pace in twenty years.
Boris Johnson said:
“We’re seeing the effects of inflation around the world hitting this country as well as everywhere else. We’ve got an inflationary price bump that we’ve got to get through.”
The Bank of England Chief Economist Huw Pill said last week that further inflationary pressure could tip the Bank toward a 50bps interest rate hike. Investors are already betting that interest rates will go to 3% to tackle inflation, which the BoE says can hit 11%.
Macron loses his majority in election upset
According to The New York Times, French President Emmanuel lost his majority after a surge of opposition votes on Sunday. As a result, Macron’s Ensemble won only 245 seats. A majority consists of 289 seats and Macron fell short of that total.
The euro opened weaker in Asian trading after the surge in opposition votes.
The far-right National Rally secured a record 89 seats. The left and right swing will make life tough in Macron’s second term. Macron will keep control of the executive branch, but it will be harder to pass legislation. He will have to rely on coalitions on various topics.
In the European labour market, industry leaders say that the aviation industry has lost 600,000 workers since the pandemic. The issue is leading to flight problems across the Eurozone with airlines such as EasyJet cancelling hundreds of summer flights. There are also strike threats in Belgium, Spain, France and Scandinavia.
The aviation industry globally lost around 2.3 million jobs since the pandemic, with ground crews and security being the worst affected, according to Air Transport Action Group.
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