Will the Pound to Euro exchange rate break above 1.16 this week?

The Pound has begun the week in a bullish fashion after the Spring bank holiday yesterday, with the GBP/EUR exchange rate hitting a fresh 6-month high this morning.

Despite the economic calendar in the UK being very sparse this week, the economic data releases overnight has provided the Pound with a boost.

To summarise the data released last night, overall shop price inflation has hit a fresh high according to the British Retail Consortium (BRC), although fresh food inflation has eased slightly for the first time in a while. The overall index has climbed to 9% but fresh food price inflation dropped from 15.7% to 15.4%.

The increasing rates of inflation within the UK has resulted in the Bank of England hiking interest rates 12 consecutive times, and financial markets are pricing in another hike next month with a 0.25 basis point hike a 90% possibility, and a 0.5 basis point hike a 10% possibility according to analysts.

With the overall inflation rate climbing, analysts are now expecting the Bank of England to hike the base rate up to 5.5% by Autumn.

The rate is currently 4.5% so the expectation of further raises is perhaps the reason behind the Sterling strength we’ve seen so far this morning.

The Pound has reached a fresh 6-month high of 1.1565 so far today, after previously struggling to break above the 1.1550 level despite consolidating about 1.1500. There has been little volatility over the past month, with the Pound gradually climbing roughly 2% over the past month against the Euro.

The next interest rate decision will be on the 22nd of June, and in the lead up to that decision it will be data releases such as the RBC’s overnight that can impact the Pound’s value.

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