The message sent from Bank of England officials recently of dialling down its monetary policy (interest rate cuts) could well have been confirmed this morning. We saw UK inflation rise in the last month – overshooting expectations and the BoE target rate. Main reason for inflation increasing is the jump from public spending – potentially indicating that households are doing better than forecasted and have more disposable income than anticipated. We could see the effect of this too from improving retail sales for last month too, moving from -0.3% to 0.5%. Take in consideration that last month had very poor weather – meaning that public spending was highly desired. Seeing improvements from the retail sector, while inflation levels increased did see GBP taking advantages in this morning session to the EUR – reaching back up at the psychological level of 1.20.
In this morning session we have also seeing the USD taking advantages to its peers, based on that its seen as a safe-haven currency. US closed its embassy in Kyiv, capital of Ukraine yesterday. Market sees this as a precaution of potential development in the region – so could the war between Ukraine and Russia escalate? It’s not for me to speculate. All we can see from a currency standpoint is that USD gained over 0.5% in the Wednesday morning session against the EUR, which indicates that there is geopolitical movements.
Later for today we do have a speech from European Central Bank president Christine Lagarde. I doubt she will get involved politically. Recent economic development and upcoming changes (read US tariffs) has put pressure on ECB and any announcements on changes could cause fluctuations to the EUR – which is already on a downward spiralling movement against many currency pairs. The EUR has recently been sensitive to unexpected changes and markets has overreacted on news – causing higher volatility than on a normal day.
GBP/EUR 1.1994 GBP/USD 1.2657 GBP/AED 4.6433
GBP/AUD 1.9445 GBP/CHF 1.1201 GBP/CAD 1.7703
GBP/NZD 2.1514 EUR/USD 1.0545 GBP/ZAR 22.843