gbp-euro-coins - GBP/EUR
  • Pound (GBP) rises ahead of the BoE quarterly bulletin 
  • Hot inflation supports further hikes 
  • Euro (EUR) falls as Spanish inflation drops to 3.3% 
  • German inflation is due 

The Pound Euro (GBP/EUR) exchange rate is rising after losses in the previous session. The pair fell 0.24% yesterday, settling on Wednesday at €1.1350, after trading in a range between €1.1345 – €1.1391. At 08:45 UTC, GBP/EUR trades +0.28% at €1.1383. 

The euro is fooling after Spanish inflation collapsed in February. Data showed that Spanish consumer prices dropped to 3.3% year on year, down from 6% and well below the 3.8% that analysts had been expecting. Falling energy costs helped inflation half from the previous month however core inflation which excludes energy and food prices only dipped slightly to 7.5%. 

the data highlights the ECB dilemma whereby headline inflation has been falling in many of the eurozone’s 20 countries however core inflation is proving to be much stickier. This problem was highlighted by ECB policymaker Isabelle Schnabel yesterday in a speech, suggesting that the ECB has more work to do reining an inflation.

Attention will now turn to Germany where data is expected to show that inflation also cooled to 7.3% year on year down from 8.7%.

In addition to inflation investors will also be looking towards eurozone consumer confidence data which is expected to hold steady in March at -19.2. Meanwhile the economic sentiment indicator is expected to nudge higher to 99.8 up from 99.7.

The pound is showing strength faces by an upbeat market mood as investors await the Bank of England quarterly bulletin. The report could shed more light on the health of the UK economy and the possible outlook for interest rates.

 The pound is being broadly supported by expectations that the Bank of England may need to raise interest rates higher after inflation unexpectedly lifted to 10.4% in February and after UK food inflation rose to a record high of 15% this month. BoE Governor Andrew Bailey has said that another rate hike could be necessary.

Looking ahead, UK GDP data is due tomorrow. This is the final reading so may not be as market moving.