- Pound (GBP) looks to the central bank announcement
- A 25 basis point rate hike is expected
- Euro (EUR) supported on Ukraine crisis optimism & high inflation
- CPI is revised higher to 5.9%
The Pound Euro (GBP/EUR) exchange rate is rising for a third straight day. The pair rose 0.1% yesterday to settle at €1.1913 after reaching a high of €1.1950 earlier in the session. At 05:45 UTC, GBP/EUR trades +0.1% at €1.1926.
The pound is pushing higher ahead of the Bank of England interest rate announcement. The central bank is widely expected to raise interest rates by 0.25%. This would take rates up to 0.75%, the level that they were before the pandemic hit, as the central bank attempts to rein in inflation which rose to 5.5% in January as a 3-decade high.
Inflation is set to continue rising, and growth is also set to slow, as energy prices soar, amid the fallout from the Ukraine Russia war. Investors will be looking to see what the BoE intends to do going forwards. Will policymakers look to bring inflation back towards its 2% target level, even if its risks tipping the UK economy into recession?
The Euro is falling versus the pound but gains versus the US dollar, supported by optimism surrounding the ongoing peace talks. Russia and Ukraine, according to reports are making steady progress towards a ceasefire, which is keeping the market mood buoyant.
A truce in the Russian war would benefit the Eurozone economy, as energy prices would start to fall again, easing fears of stagflation.
The Eurozone economic calendar has been relatively quiet recently. Today investors are digesting the latest eurozone consumer price index data, which was upwardly revised to 5.9%, from 5.8% in the initial reading and up from 5.1% year on year in January.
The ECB adopted a more hawkish stance in the latest central bank meeting; this data supports the move and could prompt an increasingly hawkish outlook going forwards.