Earlier this morning the Pound to Euro exchange rate had fallen almost 1-cent from the 10-month high the pair reached yesterday morning.
The GBP/EUR pair broker above 1.1700 for the first time since August last year yesterday, whereas this morning the pair bottomed out at 1.1610 although some upbeat data released this morning have given the Pound a boost.
Pay growth within the UK has risen by 7.2% on an annual basis when the timeframe of February to April is measured. This figure excludes bonuses and provides the Bank of England with a headache as they try to counter rising inflation levels without forcing the economy into a recession.
Whilst this growth is a major jump on the previous quarters figures, it remains below the rate of inflation and the chances of an interest rate hike next Thursday are almost certain.
One of the drivers of the Pounds value this month is whether the Bank of England will decide to hike the interest rate by 0.25% or by 0.5% and although 0.25% is the most likely, the chances of a 0.5% hike has gradually increased. This has helped strengthen the Pound although the financial markets are mostly expecting to see the 0.25% hike which will be the 13th consecutive interest rate hike from the Bank of England.
Before next weeks focus on the Bank of England, there could be fluctuations within the currency markets this week due to the volume of Central Bank updates outside of the UK. Tomorrow the US Fed Reserve will confirm its most recent interest rate decision and although no changes are expected, the commentary afterwards could offer insight into future monetary policy plans.
The European Central Bank (ECB) will then update us on Thursday with their most recent interest rate decision. A hike of 0.25% is expected so both market updates are worth following as there could be volatility within the currency markets.
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