- Pound (GBP) rises after losses yesterday
- UK food inflation surges to 4.7%
- Euro (EUR) is falls but gains against the USD
- German IFO business sentiment rises a its highest level in a year
The Pound-Euro (GBP/EUR) exchange rate is rising after losses yesterday. The pair fell 0.04% in the previous session, settling on Monday at €1.1680. It traded between €1.1659 and €1.1717. At 11:30, GBP/EUR trades +0.46% at €1.1735.
The pound is rising amid an improved market mood following a ceasefire between Israel and Iran and after hotter than expected UK grocery inflation.
Trump announced yesterday an immediate ceasefire between Israel and Iran, boosting the market mood. However, the latest report suggests the seas for mate have already collapsed. Even so, the equity market remains strong, suggesting the mood is buoyant.
British grocery price inflation jumped to 4.7% for the four weeks to June 15, marking its highest level since February last year. This was up from 4.1% in last month’s report, driven by rising products such as chocolate butter and meat. The increase in prices comes after supermarkets such as Tesco have warned that the new employer taxes and regulatory costs are adding to inflationary pressures at a time when commodity prices were also rising.
The euro is falling against the pound but gaining against the US dollar as investors react to the latest developments in the Middle East.
German economic sentiment came in stronger than expected, which could help limit the losses in the euro. The Ifo business climate indicator rose to 88.4 in June, up from 87.5 in May and slightly above expectations of 88.2. This marked the highest-level sentiment for a year, potentially marking a turning point for the eurozone’s largest economy as low borrowing costs and the government’s fiscal package boost confidence.
Meanwhile, the expectations component of the survey also jumped to 90.7, up from 89, suggesting an improving outlook.
Looking ahead, ECB chief economist Philip Lane is due to speak later today and could provide further insight as to the future path of rates for the region. The ECB cut rates by 25 basis points in June but is expected to leave them unchanged in the July meeting.