GBP/EUR: Euro Rallies vs Pound On Policy Tightening Optimism
  • Pound (GBP) falls after yesterday’s inflation-inspired gains
  • UK CPI cooled to 10.1% YoY in March
  • Euro (EUR) rises despite German PPI cooling to 7.5% YoY
  • ECB minutes & consumer confidence in focus

The Pound Euro (GBP/EUR) exchange rate is falling, paring gains from the previous session. The pair rose +0.27% in the previous session, settling on Wednesday at €1.1353, after trading in a range between €1.1313 – €1.1376. At 08:45 UTC, GBP/EUR trades -0.1% at €1.1343.

The pound is edging lower after strong gains yesterday when data showed that UK inflation was still hotter than expected. Inflation, as measured by consumer price index, cooled to 10.1% year on year in March, down from 10.4% in February. This was higher than the 9.8% that analysts had penciled in and was the seventh straight month that inflation remained in Double digits.

The hot inflation data combined with stronger-than-expected wage growth, which was revealed earlier in the week, keep pressure on the Bank of England to hike interest rates further. The market is now expecting the UK central bank to lift interest rates to a peak level of 5% by September.

Today there is no high impacting UK economic data as a result, and the pound is drifting lower.

The euro is pushing higher Spikes German wholesale inflation data falling by more than expected in March to 7.5% year on year in March, down from 15.8% in February. Wholesale Inflation is often completed a lead indicator for consumer prices and should take some pressure off the ECB to hike rates aggressively.

ECB official Isabel Schnabel had said that the central bank would be weighing up a 25 or 50 basis point rate hike in May, and it was to close call.

Attention will now be turning to the release of the minutes from the March ECB meeting, which investors will watch closely for further clues over where the central bank could take interest rates.

Eurozone consumer confidence data is authored new to be released and is expected to improve slightly in April to -18.5 from -19.2.