The Euro to British pound touched a daily high of 0.8597 levels after the Bank of England Monetary Policy Committee left the interest rate unchanged at 0.10%.
Euro to British Pound Rebounds to 0.8590
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The EUR/GBP current exchange rates gain momentum, surging to 0.8590. The euro to British pound weakened at the beginning of the weak towards 0.8525 levels but recovered by the end of the week on robust economic data.
The current exchange rate of the euros to the US dollar slipped from the 0.2260 highs in May 2021 towards $0.1850 in mid-June. The euro to the dollar today recovered to $1.1930 for the weekend ended June 25, 2021.
The British pound to USD foreign currency exchange dropped from the highs of 1.4250 in May 2021 to 1.3780 in mid-June as the UK inflation numbers surge high. The Sterling currency exchange rate surged lower on economic data released on June 11.
The Bank of England upgrades inflation and GDP forecast. Experts say that inflation can increase by more than 3%. It caused the GBP/USD currency change to move lower in mid-June. Experts believe that we can expect a rate hike in one or two years.
The British Pound to Dollars Slips as Inflation Surges
Inflation is higher with an increase in global commodity prices. Inflation is temporary, and there is no need to tighten rates, states the Bank of England. Inflation may exceed 3% in the coming months but will not affect monetary policy. The asset purchase facility remains at 895 billion British pounds.
Inflation is at 2.1% in May, and it may move higher than 3%, states the MPC. Bank Monetary Policy Committee members (MPC) opted to have interest rates unchanged. Interest rates will remain at 0.1%. A few members were for quantitative easing in the next few months. The decision will reflect on the British pound to dollar currency exchange rate.
Consumer Output m/m slid from 5.8% to -2.0%. Industrial production m/m slid from 1.8% to -1.3%, bringing a sharp decline in the British pound to USD currency change.
The resilience in the manufacturing sector helps in the ongoing recovery of the country. The first quarter of 2021 saw stringent measures to contain the coronavirus pandemic. The policy support and increasing foreign demand have helped the manufacturing and service sector to recover.
The furlough scheme will end by September, after which the economic recovery in the economy will become transparent. The rise in inflation will be evident at the end of the period, say MPC members. Though employment and GDP have improved, inflation in consumer prices is a cause of concern, say experts.
UK Consumer Price Inflation is at 2.1% in May, above forecasts. Core Inflation is at 2% in May, while in April it was 1.3%.
Eurozone Outlook Improves the Euro
Improved economic activity in the eurozone may accelerate in the second half of 2021, say officials. The coronavirus infections have come down, and the economic outlook is better. Consumer sentiment and spending improve with economic progress, which improves the euro to dollar today.
Economic growth is seen in all sectors, with employment figures improving, economic activity increasing, and signs of recovery gain momentum.
But the ECB will continue purchasing bonds up to1.85 trillion euros until March 2022 towards its Pandemic Emergency Purchase Program.
The euro converter slid on June 11 as the French Industrial production m/m went lower from 1.0% to -0.1%. The Monetary Policy Statement was another reason for the sharp decline in the euro converter. The ECB uses the press conference to communicate about its monetary policy. Various important factors like interest rates, policy decisions, inflation, and economic outlook help investors understand the current situation.
The services and manufacturing activities saw increased activity with the lifting of Covid-19 restrictions. Business activity has grown at a fast pace not seen in 15 years. Tourism improves as lockdown restrictions lift up. Indoor dining resumes in Italy.
The 19 economies saw an improved activity as vaccination programs accelerate. The IHS Markit PMI in the eurozone was at 59.2 in June. In May, it was 57.1 as manufacturing and services see higher activity.
The Spanish economy has contracted by 0.4% in the first quarter of 2021. A contraction of 4.2% is seen year on year.
New restrictions with the resurgence of the corona cases affected the tourism and hospitality sectors. It has affected economic activities in the country. Spain is the fourth-largest in the eurozone.
Consumer spending improves with the eurozone activity picking up. Inflation may remain below the projected horizon, say experts.
US Dollar Index
The US Federal Reserve took a hawkish approach to project two rate hike increases in 2023. The dollar went above the 92.00 marks and was unable to break below the support region at 91.50.
The USD touched a two-month high last week at 92.00.
The US dollar index slipped to 110.58 against the Japanese yen. The dollar index has weakened against a basket of other currencies on rising inflation, while consumer spending remains subdued. The Federal Reserve Chairman Jerome Powell’s remarks on the bond market and rate hikes put the US dollar at multi-month highs above the 91.50 mark.