- Pound (GBP)consolidates gains ahead of CPI data
- BoE broadly expected inflation to be transitory
- Euro (EUR) tumbles of stronger US Dollar
- Eurozone industrial production in focus
The Pound Euro (GBP/EUR) exchange rate is holding steady after solid gains in the previous session . The pair settled 0.23% higher on Tuesday at €1.1727, around the high of the day and a level last seen in early April. At 05:45 UTC, GBP/EUR trades +0.02% at €1.1729.
The Pound pushed higher on Tuesday as the Bank of England removed its remaining pandemic era curbs on dividend payments by top UK banks. The BoE said that the stress tests showed that the banks could deal with the fallout of covid on the economy. The BoE’s Andrew Bailey said that the economic picture had improved, enabling the central bank to relax control. The vote of confidence from the BoE boosted sentiment towards the Pound.
All eyes will now be on UK inflation data. Inflation, as measured by the consumer price index is expected to show a 0.2% rise month on month in June, down from a 0.6% rise in May. Annually, inflation is expected to tick higher to 2.2%, up from 2.1% and ahead of the BoE’s 2% target.
The data comes as concerns over elevated inflation linger. Whilst the BoE Governor Andrew Bailey believes that the spike in inflation is temporary, out-going chief economist Andy Haldane has on several occasions raised his concerns over inflation running too hot.
The Euro traded under pressure on Tuesday owning mainly to the stronger US Dollar. The Euro trades inversely to the greenback. The US Dollar surged after inflation in the US rose at its fastest pace since 2008, prompting speculation that the Fed could look to tighten monetary policy sooner.
The Euro slipped despite German inflation coming in above the 2% target at 2.3% year on year in June. This was in line with forecasts.
Looking ahead the Eurozone economic calendar is quiet with just industrial production number for the region due to be released. Industrial production is expected to decline -0.2% month on month in May, down from 0.8% in April.