GBP/EUR: Pound Shakey vs. Euro Ahead of Brexit Bill Debate
  • Pound (GBP) extends gains on rising inflation expectations
  • UK labour market data due tomorrow
  • Euro (EUR) fell last week after ECB minutes & on weak German data
  • German ZEW economic sentiment data due tomorrow

The Pound Euro (GBP/EUR) exchange rate is kicking the week off on the front foot, extending solid gains from last week. The pair rallied over 0.7% across the previous week, settling on Friday at €1.1763, the pair had spiked up to a high of €1.18 earlier in the week. At 05:45 UTC, GBP/EUR trades +0.22% at €1.1790.

Last week was a quiet week as far as data was concerned for the Pound, leaving macro themes very much in the driving seat. The energy crisis in the UK is boosting inflation expectations and is boosting bets that the Bank of England could be forced to move sooner to hike interest rates. The BoE have said that they expect consumer price index to rise above 4% by the end of the year. Meanwhile, analysts at Deutsch Bank suggested that UK retail inflation could rise to 7% as soon as April.

This week the UK economic calendar is slightly busier than last week with Tuesday’s ILO unemployment data in focus. The UK is expected to see 183,000 jobs added. However, the furlough scheme continued to wind down coming to an end on September 30th. Whilst this is likely to be more evident in next month’s data, there could well be an increase in the claimant count.

The Euro lost ground last week after the minutes from the latest European Central Bank meeting revealed that the central bank considers that the recent spike in inflation will fade over the medium term.

The minutes also revealed that the ECB considered a larger reduction in asset purchases last month. It also announced that it was studying a new bond buying plan, which caught the market slightly off guard, dragging on demand for the Euro.

Looking ahead there is no high impacting Eurozone data due to be released on Monday. Tuesday sees the release of ZEW German and Eurozone economic sentiment data. This comes after German data across the previous week was particularly disappointing.

The closely watched ZEW economic sentiment index is expected to decline to 24 from 26.5.