GBP / EUR: a stable pair ahead of a busy week

  • The British pound (GBP) edged higher on last week’s gains
  • BoE decision on interest rates on Thursday
  • The euro (EUR) fell on Friday despite high German inflation
  • ECB decision on interest rates on Thursday

The Euro pound (GBP / EUR) exchange rate was only a pip or two higher on Monday, adding to last week’s gains. The pair gained 0.3% over the past week, settling at € 1.1727 on Friday after hitting € 1.1782 earlier in the week. At 5:45 am UTC, the GBP / EUR is trading + 0.01% at € 1.1728.

The pound sterling rose at the end of last week, despite the slowdown in UK economic growth at the start of the fourth quarter. October’s GDP stood at just 0.1%, down from 0.6% in September and well below the 0.4% forecast by analysts.

Data has revealed that the UK economy has slowed even before the government tightened COVID restrictions under Plan B, which does not bode well for economic growth for the remainder of the fourth quarter.

Analysts now expect the Bank of England to push back the interest rate hike and wait until the February meeting. At this point, they will have a better understanding of Omicron’s impact on the economy.

The nine BoE decision-makers will announce their monetary policy decision on Thursday at the last meeting of the year.

No high impact UK economic data is due for release today. However, there is plenty of data to be released throughout the week, including UK unemployment, inflation figures and retail sales.

The euro fell against the pound, but gained against the US dollar on Friday after the final German inflation reading for November confirmed that prices were rising at the fastest pace in 29 years. German inflation rose 5.2% year on year in November.

Despite the surge in inflation in the region, according to ECCB President Christine Lagarde, the central bank is unlikely to raise interest rates in 2022, a stark contrast to the BoE and the Federal Reserve, which could increase their rates in the months to come.

There is no high impact data on the Eurozone due for release today. The focus this week will be on the ECB’s monetary policy meeting on Thursday.

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