This has been a very exciting week for the GBP/EUR exchange rate as the Pound has reached its highest level in 2021 trading above 1.19. This increase was as a result of ECB Governor Andrew Bailey stating on Monday he was feeling “very uneasy” about inflation. Bailey also stated, “All meetings are in play,” with regard to next month’s policy decision. On the back of the governors comments the GBP rose by 1% against the EUR.
Both the Eurozone and UK announced CPI (YOY) inflation figures on Wednesday. Inflation in the UK was forecasted to be 3.9% (YOY) for October but the actual reading was 4.2%. The overheating of prices, due to a multitude of factors, has proven to be a current global issue that is being acutely felt within the UK. Similarly, the Euro area posted above target, but expected inflation figures of 4.1%. The surprise element of the UK figures proved to be a real boon once again for the Pound with the currency strengthening by a further 0.5% versus the EUR.
Like the UK, the Dollar has prospered from a general belief in monetary policy tightening. The Dollar has hit 16-month highs with the EUR firmly on the backfoot. Money markets are pricing a fed rate hike as early as mid-2022 with a general expectation of a hike in June with another following in November.
Looking ahead to next week on the data front, the calendar seems a bit lighter with the following two releases the main data points of interest.
Tuesday 23 November 2021 at 08:30
- UK Manufacting PMI (Oct)
- UK Services PMI (Oct)
