GBPEUR reaches highest level since December; BOE strikes hawkish tone following inflation data
GBP/EUR has started the week on the front foot, breaching the resistance level of 1.1531 and is trading comfortably above 1.1550 at time of writing.
The GBP/EUR rate year-to-date rally has been largely frustrated by a major level of technical resistance on the charts thus far in the latter half of May. However, consolidation around the 1.15 level now seems to have prompted upwards movement, specifically since the release of European inflation figures from last Thursday.
As well as that, financial markets have shifted rapidly to imply a high probability of the Bank of England Bank Rate being raised to 5.5% since the UK inflation data in the previous week suggested that the April decline was the result of earlier declines in energy prices.
That was further evidenced by the core inflation rate, which climbed from 6.2% to 6.8% after prices of domestically produced goods and services rose in various categories following the turn of the financial year, which is exactly the kind of price increase that the BoE has been attempting to prevent.
These new hawkish tones from the BoE has prompted the GBP to rally to highs since December 14th vs the EUR – with the interbank rate currently at 1.1570.
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