GBP/EUR: Pound Rallies Ahead Of BoE Announcement
  • Pound (GBP) rises after three days of losses
  • UK inflation could hit 20%
  • Euro (EUR) slips after strong gains post-German inflation data
  • EZ inflation is due

The Pound Euro (GBP/EUR) exchange rate is edging higher on Wednesday snapping a three-day losing run. The pair settled -0.6% lower yesterday, at €1.1636, after trading in a range between €1.161 – €1.1739. At 09:45 UTC, GBP/EUR trades +0.04% at €1.1641.

The pound is edging higher after falling for the past three sessions. Fears over rising energy costs and a recession in the fourth quarter dragged on demand for sterling.

Data from the British Retail Consortium showed that inflation in shops and supermarkets rose by 5.1% over the past 12 months. This is the largest increase since 2005 as costs jump following the Ukraine war.

Separately UK business confidence sunk to its lowest level since March 2021 as companies fret over surging prices. According to the Lloyds bank business barometer, confidence declined for a third straight month.

According to the investment bank, Goldman Sachs inflation in the UK could peak at 20%. Furthermore, the investment bank expects the UK to fall into recession in the fourth quarter.

There is no high-impacting UK data due to be released today.

The euro is edging lower as investors await eurozone inflation data. Inflation is expected to rise to 9% a record high.

The data comes after German inflation rose to 8.8% year on year in August, an almost 50 year high as food and energy prices continued to rise. Gas prices had surged to a record high amid the fallout from the Russian war.

Hot inflation mounts pressure on the European Central Bank to hike interest rates more aggressively in the September monetary policy meeting next week. Over the weekend ECB policymakers ramped up the hawkish rhetoric.

Meanwhile, economic sentiment fell by more than expected in August, dropping to 97.6, down from 98.9 in July.