- Pound (GBP) rises as Bailey hints to more rate hikes
- He also alluded to rates staying higher for longer
- Euro (EUR) was boosted yesterday by hawkish Lagarde comments
- German inflation data is due
The Pound Euro (GBP/EUR) exchange rate is rising after three days of losses. The pair fell 0.43% in the previous session, settling on Wednesday at €1.1576 and trading in a range between €1.1548 – €1.1638. At 07:35 UTC, GBP/EUR trades +0.11% at €1.1589.
The euro jumped higher in the previous session after European Central Bank president Christine Lagarde reiterated her hawkish message. The persistence of inflation was a major theme as she highlighted strength of underlying prices. Lagarde warned that the ECB will need to be persistent in hiking rates, but she also said that the central bank would take decisions on a meeting-by-meeting basis.
Christine Lagarde reiterated that ECB is likely to raise interest rates again in July, although she refrained from committing to another height or not in September.
Looking ahead, attention will now turn to German inflation data, which is expected to tick higher to 6.3% year on year in June, up from 6.1%. This comes after German inflation fell by much more than expected in May.
The data also comes after German consumer confidence unexpectedly deteriorated, dropping to -25.4, down from -24.4 and below the -23 level expected. The data is just the latest weak German data raising concerns of a prolonged recession in the eurozone’s largest economy.
The pound is riding after the Bank of England governor Andrew Bailey hinted that interest rates might remain at peak levels for a longer period of time than to market is currently expecting due to persistent inflation.
Andrew Bailey noted that several more rate hikes are being priced in following last week’s 50 basis point hike. The market now sees peak rates at 6.25% in February before staying on hold for at least six months.
There is no high-impacting UK economic data due to be released today. Investors will continue digesting Andrew Bailey’s comments. Sentiment could also influence the pound.