- Pound (GBP) looks to Thursday BoE rate meeting
- BoE could hike rates by 75 basis points
- Euro (EUR) fell after record German PPI
- Eurozone economic calendar is light
The Pound Euro (GBP/EUR) exchange rate is edging higher for a third straight session. The pair settled +0.06% higher yesterday at €1.1410 after trading in a range between €1.1385 – €1.1463 across the session. At 05:45 UTC, GBP/EUR trades +0.06% at €1.1414.
The pound traded cautiously higher yesterday as after reports emerged that the UK government would cap energy bills for businesses this winter. There are few details on the Bloomberg report but suggest that the new Prime Minister is looking to support businesses as well as households this winter. At a huge cost, of course.
The support package for businesses is expected to cost £40 billion pounds, significantly less than the £150 billion-plus that the household energy support package is expected to costs. With all this government spending, government borrowing will be under the spotlight today with the release of public sector net borrowing data, which is expected to show that borrowing increased in August.
The data comes ahead of the government’s min-budget later this week, which is expected to set out in more detail how the government intends to fund all the spending. Gilts yields have already risen to a decade high amid signs that the bond market could be uncomfortable with such high debt levels.
The euro came under pressure after German wholesale inflation, as measured by the producer price index jumped to its highest level on record at 45.3% year on year, up from 37.2% in July and well above the fall to 37.1% forecast. The surge in factory gate inflation comes as energy bills as good as doubled compared to the same period last year.
High PPI usually means that consumer prices will continue rising, and headline inflation will push higher.
Today the economic calendar is relatively quiet. Investors will be watching out for a speech from Putin. Otherwise, sentiment is likely to drive the pair which will also be watching the Fed rate announcement closely.