- Pound (GBP) rises after inflation hits a 30 year high
- BoE could look to hike rates again
- Euro (EUR) falls on claims of firing on Russian backed rebels
- Eurozone economic bulletin due
The Pound Euro (GBP/EUR) exchange rate is pushing higher for a second straight day. The pair rose +0.24% on Wednesday, settling at €1.1941 towards the high of the day. At 05:45 UTC, GBP/EUR trades +0.16% at €1.1959
The pound pushed higher in the previous session after inflation hit a 30 year high in January. Soaring energy bills, higher wages and clothing pushed inflation up to 5.5% year on year, up from 5.4% in December. Analysts had expected inflation to stay steady at 5.4%.
The ongoing Russia, Ukraine tensions are keeping energy prices high and whilst there are some signs that supply chain issues are easing for certain goods, broadly speaking the risk for inflation remains to the upside.
The BoE expects inflation to continue rising to around 7.25% in the Spring before easing lower, his has been upwardly revised from 6%. The central bank has already raised interest rates twice, once in December and again in February. The high inflation print, which came after upbeat jobs data yesterday could prompt the BoE to raise interest rates again sooner rather than later.
The euro fell versus the pound but gained versus the US dollar as investors continued digesting the latest Russia-Ukraine headlines. There is still plenty of uncertainty over where the situation is heading. Whilst Russia said that it was withdrawing troops the head of NATO said there is no evidence of this and in fact said that Russia appears to be adding more troops. Unsubstantiated reports of firing on Russian backed rebels is hurting the euro today. Risk sentiment is likely to be a key driver over the coming sessions.
Eurozone industrial production came in above forecasts, despite the ongoing global supply chain issues and rising input prices. Industrial output rose 1.2% month on month in December, well ahead on the 0.3% growth forecast. On an annual basis production rose 1.6% defying expectations of a -0.5% decline.
Today, investors will turn their attention towards the release of the economic bulletin, in addition to a speech by ECB policy maker Lane.