- Pound (GBP) rises after upbeat BoE comments
- CPI expected +0.5% YoY
- Euro (EUR) lifted by upbeat German ZEW sentiment data
- EZ CPI expected -0.3%
The Pound Euro (GBP/EUR) exchange rate is advancing, paring yesterday’s losses . The pair settled just a few pips lower on Tuesday at €1.1235 after picking up off the low of €1.1212. At 05:15 UTC, GBP/EUR trades +0.1% at €1.1246.
The Pound picked up from session lows on Tuesday following upbeat comments from Bank of England’s Andy Haldane. The central bank’s chief economist said that he expects the British economy to begin to recover “at a rate of knots” from the second quarter this year as the covid vaccine continues to rollout.
The UK government is rollout covid vaccines at a solid rate and the government hopes to ease lockdown restrictions by Easter.
On the UK economic calendar, inflation as measured by consumer prices will be in focus and could help to boost the Pound. Analysts expect CPI to rise +0.3% month on month in December, rising 0.5% year on year, up from 0.3% annually. Core inflation is also expected to pick up to 1.3%, up from 1.1% in November.
Whilst this is still a significant distance from the BoE’s 2% target, it is a least a step in the right direction. Rising inflation will also reduce the chances of the BoE moving towards negative interest rates, at least for now.
The Euro found support in the previous session thanks to rising risk appetite and a better than expected German ZEW economic sentiment survey. The indicator of economic sentiment in Germany rose to 61.8 in January, up from 55 in December and ahead of the 60 forecast. The data indicates that the outlook for Europe’s largest economy has improved despite the uncertainty surrounding covid.
Looking ahead, Eurozone inflation figures will also be under the spotlight. Analysts are expecting consumer prices to remain depressed at -0.3% year on year in December. A weak reading could drag on the common currency ahead of the ECB meeting on Thursday.