Pound Aussie Exchange Rate Pulls Back Following Bank of England Announcement
  • Pound (GBP) supported by strong inflation data
  • BoE could hike rates sooner
  • Euro (EUR) slips on USD strength
  • Eurozone industrial production beats forecasts

The Pound Euro (GBP/EUR) exchange rate is heading higher for a second straight session. The pair settled very mildly higher on Tuesday, up 0.09% higher at €1.1707 towards the high of the day. At 09:45 UTC, GBP/EUR trades +0.2% at €1.1734.

The Pound jumped in the previous session after data revealed that inflation hit a 9 year high in August, boosting bets that the Bank of England could move to hike interest rates sooner rather than later.

Consumer prices surged to 3.2% year on year in August, up from 2% in July and above the 2.9% forecast by city analysts. Core inflation which removes more volatile items such as food and fuel also surged higher to 3.1%, up from 1.8% in July.

The strong rise in inflation comes as energy bills are expected to keep rising after caps are removed in October. The BoE sees inflation rising to 4% by the end of the year.

With inflation surging and the labour market showing signs of strength the BoE could be inclined to consider hiking interest rates sooner rather than later, which is lifting the Pound. According to a poll of economists by Reuters the BoE was expected to raise interest rates by the end of 2022. Following the inflation data this has now been brought forward to mid-2022.

Today there is no high impacting data due to be released. Attention will shift to Friday’s retail sales figures.

The Euro traes under pressure mainly owing to US Dollar strength. Euro investors ignored the upbeat Eurozone industrial production figures and moved lower.

Industrial production recovered strongly in July shrugging off supply chain issues to rise 1.5% month on month, after falling -0.1% in June.

Today all eyes are on Christine Lagarde. The European Central Bank President is due to speak. This comes following more hawkish commentary from her fellow ECB policy makers this week. Investors will be keen to see whether known dove Lagarde is ready to adopt a slightly more hawkish bias.