GBP/EUR: Euro appreciates ahead of German PPI inflation data
- The British pound (GBP) fell despite the BoE’s rate hike
- BoE raises interest rates by 25 basis points
- Falling Euro (EUR) Increases with PPI Leading
- Peace talks continue
The British Pound (GBP/EUR) exchange rate declines on Monday, extending last week’s losses. The pair was down -0.18% over the previous week, settling at €1.1923 on Friday and after trading a 140 pip range between €1.1825 and €1.1965. As of 05:45 UTC, GBP/EUR is trading -0.05% at €1.1912.
The pound fell despite the Bank of England raising interest rates last week, for a third straight central bank meeting. The UK central bank made the decision as inflation hit 5.5% in January and is expected to continue to climb.
However, the vote in favor of the rate hike was more dovish than expected at 8 to 1, with Jon Cunliffe dissenting due to the uncertainty that has spread since the war in Ukraine and its impact on rising bond prices. raw materials.
Worries over inflation and the rising cost of living will be front and center this week, as February’s Consumer Price Index is due out on Wednesday alongside the Chancellor’s latest spring budget.
Separately, the euro managed to rise last week on hopes that the Russian war could be resolved through diplomatic means as peace talks continued. As the week progressed, the lack of tangible progress only dragged the euro into the weekend.
The peace talks between Russia and Ukraine will remain the center of attention and will be a key driver of sentiment. The latest reports from Turkey suggest that Moscow and Kyiv are moving towards an agreement on critical points. However, the heavy bombardment of Ukraine again overnight raises questions about how seriously Russia is taking the peace talks.
In addition to the Russian headlines, Germany’s overall sales inflation is expected to be released. Analysts expect the producer price index to hit 26.1% year-on-year in February, from 25% in January, and mark a new high. A high PPI suggests that consumer prices will continue to rise even before the Ukraine crisis stokes inflationary pressures.