- UK: Retail inflation rises more than expected to 5.4%, the highest since 1992.
- Prime Minister Johnson under pressure, answers questions in Parliament.
- EUR/GBP breaks last week’s bottom and looks at 0.8300.
The EUR/GBP traded as low as 0.8340 hours ago before turning around and falling, breaking last week’s bottom. The cross fell to 0.8313, hitting the lowest since February 2020.
The pound is among the best performing currencies on Tuesday, buoyed by UK inflation data. The Consumer Price Index rose to 5.4%, the highest level since 1992.
“Inflation surprised to the upside again and that is only likely to increase the temptation for Bank of England officials to raise interest rates for a second consecutive meeting in February. But with the rate of inflation forecast to plummet in 2023, and the prospects for a sharp wage spike looking less likely, subsequent moves are more likely to be gradual.
The other dominant issue in the UK is the position of the prime minister Boris Johnson, of weakness after the meetings/parties held during the quarantine. Johnson is answering questions in Parliament where calls for his resignation continue.
The EUR/GBP declines found moderating in fact German bond yields are also on the upside, with the rate at 10 in positive territory after several years. This may imply that the market begins to see the possibility of some monetary tightening by the European Central Bank earlier than previously expected.
Technical levels
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