• Pound (GBP) reaches fresh 23 month high
  • Calls grow for Boris Johnson to resign
  • Euro (EUR) rises on a weak USD
  • German wholesale inflation, EU industrial production

The Pound Euro (GBP/EUR) exchange rate is rising on Wednesday adding to gains in the previous session. The pair settled +0.07% higher on Tuesday at €1.1993 after hitting a fresh 23 month high. At 05:45 UTC, GBP/EUR trades +0.07% at €1.1200.

The pound moved higher on Tuesday after UK retail sales jumped in December. According to data from the British Retail Consortium (BRC), consumers splashed out in the final month of the year even as COVID cases shot higher. Total sales grew 4.6% compared with December 2019.

A separate report from Barclaycard showed consumer spending grew 12.2% in December 2021 compared to two years earlier, driven by rising sales at supermarkets and fuel stations.

Both reports suggest that he UK economy held up well even as Omicron spread rapidly. Business remain optimistic regarding the year ahead.

Today there is no high impacting UK data. However, a political storm is brewing in Downing Street over a party held there is lockdown. Pressure is growing on Boris Johnson to resign. A shock resignation and the political uncertainty that would come with it could drag on the pound.

The Euro was supported in the previous session by a weaker US Dollar. The Euro trades inversely to the greenback. The US Dollar fell following Jerome Powell’s testimony before congress which was less hawkish than investors feared.

The Euro also found support from the news Bundesbank President Joachim Nagel, who warned that inflation could remain elevated for longer that initially expected. This is in sharp contrast to ECB President Christine Lagarde who continues to stick to the inflation is transitory script.

Today German wholesale inflation data will be in focus. Expectations are for prices to increase 17.6% year on year in December, up from 16.6% in November. Rising wholesale inflation would suggest that consumer prices have yet further to rise.

Eurozone industrial production will also be in focus. Analysts are expecting industrial output to grow at a slower rate in November at 0.5% month on month, down from growth of 1.1% in October.