GBP/EUR: Pound Higher vs. Euro As German Inflation Disappoints
  • Pound (GBP) falls amid a lack of catalysts
  • UK house prices to grow next year
  • Euro (EUR) rises after hotter-than-expected French, Spanish CPI
  • German CPI is up next

The Pound Euro (GBP/EUR) exchange rate is falling for a second straight day. The pair fell 0.10% in the previous session, settling on Wednesday at €1.1680 and trading in a range between €1.1672 – €1.1703. At 11:00 UTC, GBP/EUR trades -0.03% at €1.1677.

The euro is heading higher after French and Spanish inflation came in hotter than expected and ahead of German in inflation later today.

In France, the eurozone’s second-largest economy, inflation cooled to 3.1% in the year to February, down from 3.4% a month earlier. While this was the lowest reading since September 2021, it was also slightly above the 3% level economists had penciled in.

Meanwhile, inflation in Spain fell to 2.9% in February, taking it back below 3% for the first time in six months. However, this was slightly above the 2.8% that investors were expecting.

Both countries saw a faster growth in energy prices, which offset a sharp slowdown in food costs. However, the hotter-than-expected inflation dented expectations that the ECB would start cutting interest rates soon, supporting the euro higher.

Attention now turns to German inflation data, which is expected to cool to 2.6% year on year, down from 2.9% previously. Hotter-than-expected inflation could add to the view that the ECB will not rush to cut rates.

Elsewhere, German retail sales unexpectedly fell 0.4% month on month in January against expectations of a 0.5% rise. Data comes after retail sales slid by 1.6% in December, with the figures highlighting the struggles that households face amid record-high interest rates and still elevated inflation.

Meanwhile, the pound is drifting amid a lack of fresh catalysts. With no high impacting data, investors look to home prices, which are expected to flatline this year and rise 3% in the coming year as borrowing costs are forecast to fall from the 16-year peak of 5.25%.

Meanwhile, Claire Lombardelli, currently the chief economist at the OECD, has been named the next deputy governor for the monetary policy at the Bank of England. She will begin her five-year term on July 1st, replacing Ben Broadbent.