• Pound (GBP) rises as OECD warns of high inflation
  • RICS sees a darker outlook for the housing sector
  • Euro (EUR) falls after weak German data
  • Eurozone GDP data is due

The Pound Euro (GBP/EUR) exchange rate is rising for a third straight session. The pair rose +0.05% in the previous session, settling on Wednesday at €1.1622 and trading in a range between €1.1610 – €1.1648. At 08:35 UTC, GBP/EUR trades +0.1% at €1.1635.

The pound is pushing higher on Thursday as investors digest a warning from the OECD that UK inflation is likely to remain high across the year ending 2023 at 6.9%. This would make it the highest level of inflation within the G20 group excluding Turkey and Argentina.

Hot inflation pressures the Bank of England to continue raising interest rates. The Bank of England has increased interest rates 12 times from 0.1% to 4.5% currently. The market expects the Bank of England to continue hiking interest rates to 5.5%, implying four more hikes of 25 basis points.

Prime Minister Rishi Sunak said he would take personal responsibility if he fails to deliver on his promise to have inflation by the end of the year.

The economic calendar is relatively quiet, with the Royal Institution of Chartered Surveyors survey noting some improvement in the housing market in May. However, with further interest rate increases expected by the Bank of England, more pressure on demand is expected for the housing sector in the coming months.

The euro traded lower yesterday after German industrial production rose by less than expected, which after weaker-than-expected German factory orders and manufacturing PMI data, has raised concerns that the eurozone’s largest economy could continue its recession into the second quarter.

Looking ahead, attention now turns to the eurozone GDP, the third estimate for first-quarter growth. Economists expect growth to stall at 0% quarter on quarter, avoiding a recession. Annual growth is expected to ease to 1.2% from 1.8% in Q4 2022. However, with interest rates rising, growth could slow further in the coming quarters.