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GBP/EUR Exchange Rate Forecast: Pound Euro Steadily Rises on Jump in UK Inflation

July 14, 2021 - Written by John Cameron

The Pound Euro (GBP/EUR) exchange rate has been steadily rising this morning following a jump in inflation figures from the UK, bolstering the appeal of Sterling.

At the time of writing the GBP/EUR pairing are trading around the 1.1749 level as the Euro struggles on the back of an unexpected rise in US inflation.

Pound (GBP) Exchange Rate Steadily Rises on UK Inflation Data

The Pound has found itself steadily rising against the Euro this morning following a jump in UK inflation for June.

Whilst forecasts had predicted a small increase of 0.1%, consumer prices instead jumped up to 2.5%, the highest reading in three years.

Martin Beck, senior economic advisor to the EY ITEM Club commented on the rise in inflation saying:

‘CPI inflation continued to accelerate in June, reaching a 34-month high of 2.5%. Around half of the pickup between May and June was due to higher petrol and food prices, the latter being largely a function of base effects after a soft reading last June.’

Sam Cooper, Vice President of Market Risk Solutions at Silicon Valley Bank, commented on what the rise could mean for the Bank of England (BoE) going forward:

‘The upside surprise in the UK’s CPI reading could question the BoE’s view that inflation is transitory as the consumer price gauge recorded its second beat in two consecutive months.’

‘The data has provided sterling with an immediate boost against the dollar, as it provides evidence inflation is running hot on both sides of the Atlantic and the BoE is subsequently under the same pressures as the Federal Reserve (Fed) to monitor price rises and potentially tighten their grip on monetary policy.’

Euro (EUR) Exchange Rate Struggles on Back of US Dollar Strength

The Euro has struggled against many of its major rivals this morning following the surprise jump in inflation from the US.

Due to the negative correlation between the pairing the Euro has soured since the release of US inflation whilst the US Dollar has soared.

More so, the latest industrial production figures from the Eurozone missed forecasts and fell more than expected to -1.0% during May as supply chain issues continue to wreak havoc across the bloc.

The Eurozone continues to battle against a rise in coronavirus cases with more countries in the bloc reintroducing lockdown restrictions, or keeping a close eye on data.

France is to implement health certificates to enter bars, restaurants and long-haul flights from August, as the Netherlands re-enters lockdown measures despite reopening just two weeks ago.

GBP to EUR Exchange Rate Outlook: UK Employment Data in Focus

For Pound investors, tomorrow will see the latest employment data from the UK for May which is forecast to show that the UK labour market added 90k jobs as more of the country reopened from coronavirus restrictions.

A lack of data from the Eurozone will tomorrow see Euro traders keeping an eye on any further coronavirus developments along with the strength of the US Dollar to drive movement in EUR exchange rates.

Pound investors will keep an eye on their own coronavirus developments tomorrow as much of the UK prepares for lockdown easing on the 19 July.

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