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Pound to Euro Exchange Rate Rises as UK Inflation Edges Higher

February 17, 2021 - Written by John Cameron

The Pound to Euro (GBP/EUR) exchange rate was pushing above 1.15 this morning as positive inflation data from the UK edged higher.

At the time of writing the pair are currently trading at around 1.1509.

Pound (GBP) Supported by Inflation Rise in UK

The Pound was gaining this morning as year-on-year inflation for January edged higher to 0.7%, beating forecasts of 0.6%.

Deputy national statistician for economic statistics at the Office of National Statistics (ONS) Jonathan Athow, said:

‘Inflation rose slightly in January, with food prices increasing. Household goods also pushed up prices with less discounting this year on items such as bedding and settees. However, there were widespread January sales, with particular price cuts for clothing and footwear.’

GBP finds continued support from the UK’s combatting of the coronavirus pandemic with the successful vaccine rollout.

Prime Minister, Boris Johnson is expected to announce his ‘roadmap’ out of lockdown on the 22nd of February, though according to the Daily Telegraph the coronavirus lockdown will be implemented until ‘cases drop below 1,000 a day.’

The Daily Telegraph’s claims echo comments made from Chairman of the Health and Social Care Select Committee Jeremy Hunt earlier this month, where he warned against lifting any restrictions until cases dipped below 1,000 a day.

Euro (EUR) Suffers Losses as US Dollar (USD) Recovers

The Euro has found itself struggling this morning as continued lockdowns across the Eurozone and the recovery of the US Dollar weighs on EUR.

A jump in treasury yields has been the main push behind the recovery of the US Dollar, and the negative correlation between the EUR/USD pairing has caused the single currency to suffer.

Furthermore, continued lockdowns across the Eurozone to help combat the second wave of the coronavirus pandemic have caused investors to remain jittery over the state of the bloc’s economy, and when economic recovery could begin.

Pound to Euro Outlook: PMI Data Releases in Focus

Pound investors will be awaiting retail sales and PMI data releases in the second half of the week, which could show the state of the UK economy at the start of 2021 amid national lockdown restrictions, potentially weighing on Sterling sentiment.

Euro traders will also look to Eurozone and German PMI data releases on Friday, with a decrease in services and manufacturing adding fuel to the flames that parts of the Eurozone will suffer a double-dip recession.

The Pound to Euro exchange rate movement will also be dictated by any further coronavirus developments, with any news that the ‘roadmap’ set out next week will show the UK economy opening sooner rather than later providing support for GBP.

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