GBP/EUR: UK GDP & EU Inflation Impacts Pound vs Euro
  • Pound (GBP) rises ahead of Q4 GDP data
  • Growth of 1.1% forecast
  • Euro (EUR) falls on USD strength
  • German inflation data is due

The Pound Euro (GBP/EUR) exchange rate is rising for a second straight day. The pound rose 0.15% on Thursday, settling at €1.1860 after rising as high as €1.1892 earlier in the session. At 05:45 UTC, GBP/EUR trades +0.19% at €1.1883.

The Pound pushed higher in the previous session recouping losses from earlier in the week when Bank of England Chief economist Huw Pill sounded cautious over hiking interest rates too rapidly.

His comments came after the BoE monetary policy last week, when 4 policymakers had voted to raise interest rates by 50 basis points rather than the 25 basis points that 5 policy makers voted for.

Attention will now turn to UK GDP data due to be released today. Economists expect the UK economy to have grown by 1.1% in the final three months of 2021. A strong October and November are expected to make up for a dismal December when Omicron hit. However the hit from Omicron was contained and short lived. Looking to the US, the Q4 GDP was actually much stronger than expected, which could bode well for the UK.

The Euro came under pressure owing to the US strength. The US dollar rallied after inflation rose to a fresh 40 year high and was higher than forecast. The Euro trades inversely to the US dollar.

Earlier in the session the euro had moved higher after the release of the European Commission quarterly economic forecasts. The EC cuts its growth forecasts for 2022 but also said that inflation will get much higher. Inflation is now expected to rise to 3.5% up from the 2.2% forecast in November.

The report lifted the euro as the money markets started to price in a June interest rate hike by the ECB. This comes after the ECB monetary policy meeting last week when expectations for a rate hike this year jumped.

Looking ahead German inflation will be in focus. This is the final reading and is expected to confirm 4.9% year on year rise in inflation.