The EUR GBP exchange rate was slightly higher on Wednesday as the pair sough to arrest four consecutive days of losses. Comments from Russian President Vladimir Putin have given hope that supply will be increased in the gas market to pull down recent record high prices on Dutch gas price futures. The Polish central bank surprised markets with an interest rate rise.
The EUR to GBP rate has found support at the 0.8500 level but this will be critical support for the pair in the coming days.
Poland hikes interest rates in surprise market move
Poland unexpectedly raised interest rates by 40 basis points, caving into pressure to act against surging inflation that has already seen Hungary and the Czech Republic start tightening monetary policy. None of the 29 economists surveyed by Bloomberg predicted the move that pushed the interest rate to 0.5%, compared with inflation at 5.8%
Poland’s first hike since 2012 came a day after central bank Governor Adam Glapinski said policy makers were getting close to lifting borrowing costs from their record low. It also comes one day after the central bank said Poland would seek to buy 100 tons of gold in 2022.
Poland also said that inflation appears to no longer be transitory, and instead “may remain elevated longer than expected.”
This goes against the statements of the ECB and could see them pressured about inflation soon with Germany and other top tier economies seeing inflation above the bank’s 2% target.
Bloomberg notes that the statement also omitted previous a sentence that said the central bank will continue its bond-buying program.
Putin and White House bring respite to energy markets
It’s not often that the US and Russia act in unison but today Vladimir Putin eased fears over European gas prices, while the US White House talked down the price of oil.
European gas prices pulled back from recent highs after a surged of 60% in just two days. The easing came as Vladimir Putin said the country is ready to stabilize global energy markets.
Dutch and UK futures prices had touched fresh records amid the current gas crunch, where lower-than-anticipated supplies from Russia have been a driver of the crisis, according to some. The pullback in prices, after a week of continued gains, is highlighting the volatile nature of the current market as fears of a winter supply crunch build.
Russia’s Gazprom will increase supply via Ukraine, Putin said on Wednesday at an energy meeting in Moscow. Exports to Europe over the last nine months have been higher and could reach an all-time high this year at the current pace.
Crude oil prices also dropped by $2 after a rise in inventories, but the White House also touted a potential release of stock from its SPR oil reserve to cool prices.
“It’s a tool that’s under consideration,” the energy secretary said.
The euro versus the pound sterling has ECB meeting minutes ahead on Thursday.