- Pound (GBP) fell despite BoE rate hike
- BoE raised interest rates by 25 basis points
- Euro (EUR) fall rises with PPI in focus
- Peace -talks continue
The Pound Euro (GBP/EUR) exchange rate is heading lower on Monday, extending losses from last week. The pair lost -0.18% across the previous week, settling on Friday at €1.1923 and after trading a 140-pip range between €1.1825 – €1.1965. At 05:45 UTC, GBP/EUR trades -0.05% at €1.1912.
The Pound fell despite the Bank of England raising interest rates last week, for a third straight central bank meeting. The UK central bank made the move as inflation reached 5.5% in January and is expected to keep on climbing.
However, the vote to hike rates was more dovish than expected at 8-1, with Jon Cunliffe dissenting owing to the uncertainty spreading from the Ukraine war and the impact that it is having on rising commodity prices.
Concerns over inflation and the rising cost of living will be very much in focus this week as the February consumer price index is due to be released on Wednesday along with the Chancellor’s latest Spring Budget.
Separately the euro managed to rise last week amid the hope that the Russian war could be resolved through diplomatic means as peace talks continued. As the week wore on, the lack of tangible progress just dragged on the euro at the end of the week.
Russia Ukraine peace talks will remain very much in focus and a key driver of sentiment. The latest reports from Turkey suggest that Moscow and Kiev are making some progress towards agreement on critical points. However, the heavy bombing of Ukraine again overnight raises questions over how seriously Russia is taking the peace talks.
In addition to Russia headlines, German whole sales inflation is due to be released. Analysts expect the Producer price index to rise to 26.1% year on year in February, up from 25% in January, and would mark a new record high. High PPI suggests that consumer prices will continue rising, even before the Ukraine crisis stoked higher inflationary pressures.
