GBP/EUR: UK GDP & EU Inflation Impacts Pound vs Euro
  • Pound (GBP) holds steady ahead of CPI data
  • Wages rose at the fastest pace in a year
  • Euro (EUR) fell despite improving German ZEW confidence
  • ECB Christine Lagarde to speak

The Pound Euro (GBP/EUR) exchange rate is holding steady after booking gains in the previous session. The pair rose +0.7% yesterday settling at €1.1456 after trading in a range between €1.1353 – €1.1485. At 05:45 UTC, GBP/EUR trades -0.00% at €1.1456.

The pound is holding gains from the previous session after UK labour market data showed that wages rose by more than expected, up 5.7% year on year. This marked the strongest wage growth in almost a year. High wage growth has an inflationary impact on the economy, something that the BoE will be watching closely and could prompt another aggressive rate hike from the central bank.

Today attention will be on inflation, which is expected to rise further to 10.7% year on year in October, up from 10.1% in September. This would be a fresh 40 year high. With wage growth well below inflation, the cost pf living crisis is worsening.

The BoE forecasts that inflation will peak at 11% this quarter before start to cool heading into next year as the impact of rate hikes hit the real economy and as the economy falls into recession, lowing inflation.

The euro fell yesterday on concerns over a reportedly Russian missile hitting Poland.  NATO will meet this morning to discuss the situation. Russia is denying that it was them saying it is deliberate provocation.

Yesterday German ZEW economic sentiment was stronger than expected, rising to -30 up from -59.2 and well ahead of forecasts of -50. Economic confidence improved in the eurozone’s largest economy amid hopes that inflation is easing.

Today there are no major releases. European Central Bank President Christine Lagarde is due to speak. Investors will watch closely for comments surrounding the growth and inflation outlook and where the path for interest rates could be heading