The EUR continued its downward trajectory versus the British Pound this week as the currency fell for a seventh consecutive week. The GBP/EUR cross has pushed to a 2-year high topping 1.2033 intraday Wednesday. Again, the driving force for momentum in the currency was the inflation print on Wednesday with CPI touching 5.4% driven by a broad increase in food, drink, restaurant meals and furniture. The print represented a 30-year high for inflation in the UK and has really extenuated the cost-of-living crisis that is being intensely felt within the UK.
It appears, that after a sustained and sharp ‘V’ shaped recovery enacted post pandemic, we are now at the stage where the Bank of England must act to dampen aggregate demand in the economy to stave off continuous price increases. At the forefront, policy makers within the Bank must be considering a further interest rate increase at next month’s policy meeting. All of this plus the thought of quantitative tapering will surely lead to a few headaches for monetary policy committee members.
Meanwhile, the UK government has announced plans to end Coronavirus measures in England as it transitions from pandemic to endemic. Mask wearing will no longer be compulsory and the vaccine passports are to be scrapped.
Economic Calendar:
- Mon 24th Jan GBP Service PMI
- Wed 26th Jan USD Fed rate decision
